The disadvantages of Decentralisation are:
- Expensive – Decentralisation increases the administrative expenses. Each division or department has to be self-sufficient in terms of physical facilities and trained personnel. There may be duplication of functions and underutilisation of facilities. Therefore, a decentralised set-up is better suited to large enterprises.
- Difficulty in co-ordination – Under decentralisation, each department or division enjoys substantial autonomy. Therefore, coordination among the departments becomes more difficult.
- Lack of uniformity – Decentralisation may lead to inconsistencies when uniform procedures are not followed by various departments. Each department may formulate its own policies and procedures.
- Narrow product lines – Decentralisation requires that product lines should be broad enough to permit creation of autonomous units. Therefore, it is not suitable for small firms having narrow product lines. Similarly, decentralisation may not be possible when there is lack of competent managers at lower levels in the organisation.
- External constraints – Decentralisation may not be possible due to external factors like market uncertainties, trade union movement, government intervention, etc.