Failing to maintain employee commitment and loyalty as a business grows can have serious consequences, significantly contributing to diseconomies of scale. Here's a breakdown:

• Reduced Productivity: Disengaged employees are less likely to be motivated and productive. They may take more breaks, be less attentive to their work, and generally contribute less to the company's output.
• Increased Staff Turnover: Low morale and a lack of feeling valued can lead to higher staff turnover. Recruiting, hiring, and training new employees is costly and time-consuming. The loss of experienced employees also results in a loss of institutional knowledge.
• Poor Quality of Work: Disengaged employees are less likely to take pride in their work, potentially leading to errors, defects, and a decline in the quality of products or services.
• Increased Absenteeism: Employees who are not committed to the company are more likely to take time off work, further impacting productivity and efficiency.
• Contribution to Diseconomies of Scale: All of these factors collectively contribute to diseconomies of scale by increasing costs, reducing efficiency, and hindering the company's ability to grow profitably. For example, a high staff turnover rate in a call centre could lead to longer waiting times for customers and increased training costs, both representing diseconomies of scale.

Three factors contributing to diseconomies of scale are:

• Poor Communication: As an organisation grows, communication becomes more complex and time-consuming. Information can be distorted or delayed as it passes through multiple layers of management. For example, a large manufacturing company might struggle to disseminate important policy changes effectively, leading to inconsistent application and errors. This can result in wasted resources and reduced productivity.
• Lack of Commitment or Loyalty from Employees: Large organisations can foster a sense of detachment among employees. They may feel less valued and less invested in the company's success. This can lead to decreased motivation, higher levels of absenteeism and staff turnover. For instance, a multinational retail chain might see lower customer service standards due to a lack of loyalty among its store staff.
• Weak Coordination: Coordination becomes increasingly difficult in larger organisations with multiple departments and processes. Lack of effective coordination can lead to duplication of effort, conflicting goals, and delays in production. Consider a large construction company where poor coordination between the design, procurement, and building teams can result in costly rework and project overruns.

Poor communication is a significant contributor to diseconomies of scale. As a business expands, the communication channels become more complex and prone to breakdown. This can manifest in several ways:

• Information Distortion: Messages can be misinterpreted or altered as they pass through multiple levels of management. A directive from senior management might be poorly understood by lower-level employees, leading to errors in execution.
• Delayed Information: Important information may take a long time to reach the relevant individuals, hindering timely decision-making. For example, a delay in communicating a change in customer demand to the production department could lead to overproduction or underproduction.
• Lack of Feedback: A lack of feedback mechanisms can prevent managers from understanding the effectiveness of their decisions and the concerns of their employees. This can result in policies that are not well-received or that are counterproductive.
• Example: A large supermarket chain might struggle to effectively communicate new health and safety regulations to all its store managers and staff. If the communication is unclear or incomplete, it could lead to safety violations and potential legal issues. The resulting delays and errors in implementing the regulations would represent diseconomies of scale.