While the notion of devolving management decisions to the team is attractive in terms of motivation, there are two types of problem that can arise:
1. Decisions are liable to be primarily influenced by technical considerations rather than business decisions. This is natural given the type of people on an XP team – it is difficult for them to take a business perspective.
2. Because of the focus on rapid iteration, management decisions tend to be short-term and pay insufficient attention to long-term issues. While this is in keeping with the XP philosophy, there is sometimes a need for a more detached, longer-term perspective which can be taken by a manager.
I assume here that management decisions on e.g. the performance of team members are not taken by the team. Given the close knit nature of XP teams, it is difficult for the team to take decisions that censure individual team members.