1. Poor environmental adaptation: - Centralization Is not suitable in dynamic and changing environment. As modern organization have to run in most dynamic and uncertain environment. Centralization cannot co-operate with environmental change and cannot adjust accordingly.
2. Poor diversification management: - Centralization is suitable only in those organizations which has single business or single product. Diversification of business, product and activities cannot be better managed through centralization. When organization wants to run different business, manufacture different products and start different activities. IN this case centralization becomes ineffective.
3. Unsuitable for programmed decision: - To take programmed decision which are frequently taken and used in day to day work, centralization is not required.
4. Poor management development: - Management means developing managers and executives. As all decisions are taken by top level management so middle and lower level management cannot participate and involve in decision making and planning. So, middle and lower level managers are poorly developed.
5. Low motivation and commitment: - When employees have the authority to make decision, naturally they will be de-motivated at work and their commitment decreases, their moral will be low.
6. Delayed decision: - Top level management will be overloaded by decision making and decisions cannot be taken at right time.
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