Description
When your input features are not projected (that is, when coordinates are in degrees of latitude and longitude), or when the output coordinate system is set to a geographic coordinate system, or when you specify an output feature class path to a feature dataset that has a geographic coordinate system spatial reference, distances are computed using chordal measurement. Chordal distance measurements only provide a good estimate of geodesic distances less than about 30 decimal degrees.
Solution
Project your data to a projected coordinate system and rerun the analysis, or remove locational outliers (features far from all other features) before you run this analysis.