Decentralized Organization Structures Empower and Energize
“Any intelligent fool can make things bigger, more complex. It takes a touch of genius — and a lot of courage — to move in the opposite direction.” — E. F. Schumacher, 20th century German economist and conservationist
The evidence is clear and overwhelming. Centralized, hierarchical organizations work about as well as the old Soviet Union. Despite all the evidence, we keep smacking into many variations on the centralization themes. What makes things even worse is how senior managers in these dysfunctional organizations proclaim empowerment, participation, teams, leadership, trust, and the like. They often take partial measures while expecting total success. They liberate parts of their organizations while limiting other parts. They push hard with one foot on the accelerator while also pushing hard with their other one on the brake. Their words say, “you are empowered”. Their actions say, “you are empowered as long as you get approval first. “
These dysfunctional organizations end up trying to go in two opposing directions at once. We once halted an executive retreat and everybody went home after the group of seven division presidents and corporate staff vice presidents couldn’t agree on whether their values were centralization or decentralization. Trying to do both at once was ripping the organization apart. The CEO never could decide which direction he wanted to commit to. He was eventually fired as frustrations and infighting rose while organization performance fell.
Most centralists don’t set out to deceive anybody. In their heads they know that high degrees of involvement, participation, and autonomy are key elements in high organization performance. But in their hearts, they still crave orderliness, predictability, and control. That’s one of the reasons strategic planning causes so many performance shortfalls in their organizations. It’s part of their futile search for a master plan that can regulate and bring a sense of order to our haphazard, unpredictable, and rapidly changing world.
Our narrow accounting systems give centralists plenty of reinforcement. For example, hard financial measures can clearly show that consolidating and centralizing support services and functions saves money and increases efficiency — at least on paper. What doesn’t show up is the alienation, helplessness, and lack of connections to customers or organizational purpose that centralized bureaucracy often brings. The energy-sapping and passion-destroying effects of efficiencies may save hundreds of thousands of dollars. But traditional accounting systems can’t show the hundreds of millions of dollars lost because of lackluster innovation, mediocre customer service, uninspired internal partners, and unformed external partnerships.
I am an extreme (some might argue dangerous) decentralist. Since I began my management career, I’ve given people high degrees of autonomy. I’ve run even small organizations to the point of such inefficient decentralization that people are running their own show. It works. Here are some of the reasons:
• Everyone can see and manage their work as part of a whole, interconnected system, not a bunch of parts and pieces.
• People are trusted and treated as responsible, caring, and committed adults — which is how they then behave.
• A collection of small self-contained teams or business units are many times more flexible and responsive at meeting threats and capitalizing on opportunities.
• Ownership, commitment, energy, and passion levels are much higher.
• Everyone focuses on meeting customer/partner — not the internal bureaucracy’s — needs.
• People have more control over their work. This replaces the vicious cycle of learned helplessness with a virtuous cycle of hopefulness and leadership.
• Bureaucratic committees become entrepreneurial teams.
• Feedback loops are much clearer, shorter and closer to the customer and markets.
High performing organizations that are thriving in today’s chaotic world are adapting and pioneering a wide variety of highly decentralized structures. They are giving up control of people so that people can control their own and the organization’s destiny.