What are the disadvantages of centralisation and decentralisation?

Disadvantages of both centralization and decentralization vary, so much so that it requires a further detailed explanation over one sentence.

• Centralization

Centralization is the process of providing a higher level authority with the decision making power. A head office or corporate center will have the power. It also means the knowledge and information is at the top rather than spread throughout the organization. The control is mostly in the hands of the managers in a tiered system. These can be advantages because everyone knows who is in control. They can also be disadvantages in that the people at the top tend to want to retain the power. They want the control to be centralized with them. Given this issue those in lower positions may not have all of the information they need to perform their jobs to the best of their ability.

• Decentralization

Decentralization is where the decision making is at lower levels in the hierarchy. This means that the decision making can be in divisions, branches, departments, or subsidiaries. The knowledge and information is flowing from the bottom to the top of the organization. It also means that the top managers have less control in the system because there is autonomy in the lower ranks. With decentralization there can be problems with knowing who is exactly in charge.

In other words, a person in the lower level may try to improve upon things without consent from the higher levels. To a degree this is okay, but in certain systems this will not work because there are too many people involved in the process. The power is also with the lower level. This means any decision from higher management that could be to the good could be ignored.