All governments devolve some decision-making powers from higher to lower levels of authority. The challenge is determining the extent of the devolution and the methods for co-ordinating devolved delivery of government. A unitary state in which all power is held and exercised at the 'centre' may have a high degree of co-ordination, but risks having too little regard for decision-making at lower levels. Conversely, a system that allows two much devolution of authority and program implementation faces two major risks: unnecessary duplication of activities (e.g. where states make similar laws about similar subjects), and lack of co-ordination, leading to deterioration of the system as a whole. States need not have a formal federal structure in order to achieve decentralisation. A unitary state can decide to devolve responsibilities to regional and local branches of government. On the other hand, the executive can also decide to remove responsibilities from lower levels, and it is this level of uncertainty that formal federal systems seek to avoid. In an ideal federal system, one state will not be legally subordinate to another, and the system as a whole is not centralised.

Although Frenkel suggests that federalism is an organisational principle rather than a legal term that can be given a legal form, such as a federation or confederation, it is generally set out in a formal arrangement, particularly a constitutional arrangement.