Q3RQ - Horngren'S Financial And Managerial Accounting

Question

List the disadvantages of decentralization.

Step-by-Step Solution

Answer

Disadvantages of decentralization:

• Lack of skilled managers
• Impossibility in delegation
• Emergency decisions are not possible. 

Step 1: Meaning of Decentralization

In business terms, decentralization refers to the process of delegating the activities among the various departments and personnel of the organization by the authorized sources, groups, or locations.

Step 2: Disadvantages of decentralization

The process of decentralization consists of the following disadvantages:

• The organization often witnesses the lack of qualified managers for delegating the activities.
• Some activities are oriented toward a particular person or group; hence, decentralization is not possible in some cases. 
• If a business requires to make decisions urgently due to some emergency, then the same is not possible in the decentralization process.