Which of the following is a disadvantage of decentralization?

• A. It eliminates the need for local decision-making.
• B. It guarantees faster communication between all levels of management.
• C. It can lead to inconsistent policies across different regions.
• D. It always results in lower costs for all firms.

Answer: (C)

Verified step by step guidance

1. Understand the concept of decentralization: it refers to the process where decision-making authority is distributed to lower levels in an organization rather than being concentrated at the top.
2. Identify the typical advantages of decentralization, such as faster decision-making at local levels, increased flexibility, and empowerment of managers closer to the operational activities.
3. Recognize that decentralization can also have disadvantages, including the potential for inconsistent policies because different regions or units may make decisions independently without uniform coordination.
4. Analyze each option given in the problem to see which one correctly describes a disadvantage: eliminating local decision-making and guaranteeing faster communication are not disadvantages, and lower costs are not always guaranteed.
5. Conclude that the correct disadvantage is that decentralization can lead to inconsistent policies across different regions, as this reflects the challenge of maintaining uniformity when decision-making is spread out.