Organisations and management accounting
Organisations and management accounting

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Organisations and management accounting

5.2 Disadvantages of decentralisation

Coates et al. (1996, pp. 115–6) also identify the disadvantages of decentralisation as follows:

  • Dysfunctional decision making. This occurs where managers take actions which improve the measured performance of their organisational segment, but damage the organisation as a whole. For example, a manager in one department may keep costs down in his/her own department in ways which have an impact on the quality of service provided to other departments.
  • Loss of control. There is a danger that senior management may lose control of the organisation, as they become far removed from the detail of underlying operations and unaware of the decisions being made by lower level managers.
  • Increased cost of control. Costly management information systems may be necessary to monitor the performance of lower management levels to ensure that delegated decision making authority is being used in the best interests of the organisation.
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Figure 11 ‘In the interest of overcoming my reluctance to delegate, starting Monday I want you to do all of my worrying for me.’

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