When business-unit managers inability to remain informed across multiple business units leads them to blame poor performance on difficult competitive conditions, even when it is the result of their inability to craft a successful business model, organizational problems increase. Top managers must spend an enormous amount of time and effort to solve them which increases bureaucratic costs and cancels out the profit-enhancing advantages of pursuing diversification, such as those obtained from sharing or leveraging competencies.

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The passage states that when business-unit managers blame poor performance on difficult competitive conditions instead of their own inability to craft a successful business model, organizational problems increase and top managers must spend more time and effort to solve them, which increases costs and cancels out the advantages of diversification.

When Business-Unit Managers Inability to Remain Informed Across Multiple Business