The case for decentralized control

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Douglas Adams put five books into his Hitchhiker’s Guide to the Galaxy Trilogy. KJR being a less ambitious undertaking, this will be the last installment in the Keep the Joint Running Centralization/Decentralization Trilogy.

And while Arthur Dent was endangered by the Vogons … the most dangerous bureaucrats in a multidimensional universe … we’re merely trying to avoid creating any more run-of-the-mill corporate bureaucracy than we have to.

The plot thus far: Two weeks ago we challenged the increasingly popular approach to corporate planning and decision-making — at least as recommended by purveyors of one-size-fits-all strategic solutions — that all wisdom flows down from the executive suite like (pick your metaphor) manna from heaven, rain on the fertile fields, or the end of civilization from a plummeting asteroid.

Last week we continued by exploring what should be the ideal case for centralized decision-making, the perfectly siloed enterprise-as-machine, where every organizational unit is a cog. It’s an interconnected collection of black boxes, each of which has clearly defined responsibilities, boundaries, interfaces in the form of inputs and outputs, and specified flows of information and materials from one black box to the next.

It turned out that even the enterprise-as-machine has plenty of room for individual initiative, creativity, and empowerment, although that room is literally limited to in-the-box thinking: Employees at all levels should be empowered to improve the internal functioning of their box on the organizational chart, so long as they don’t change their interfaces.

And now, the exciting conclusion …

Compare the enterprise-as-machine to a more organic alternative, where those responsible for semi-autonomous parts understand what is important and how all the pieces fit together. While aligned to a common purpose, they are encouraged to collaborate with each other as the situation demands, figuring things out in creative ways.

Organizations like this won’t successfully compete on price with their mechanical counterparts, because efficiency isn’t their driving force. It can’t be. Efficiency doesn’t come from perfect design. It comes from practice — from experience, engaging in a constant search for incremental improvements.

Organic organizations (in the sense of being more like organisms than machines, not in the sense of being built out of carbon-based molecules, and aren’t you glad I clarified this?) aren’t oblivious to improvement. Their processes just don’t last as long — they have less time to improve.

More interested in new opportunities than exploiting old ones, their focus is innovation and invention. Which means they don’t have to compete on price. What they do is spot opportunities … or, even better, create them … and reconfigure as needed to take advantage of them.

And because these are new opportunities, no mechanistic competitor will even exist to offer a lower price. At least, not for awhile. By the time one shows up, the organic organization will be ready with its next innovation.

Another difference: Where their mechanistic counterparts will happily inform potential customers, “That isn’t what we do,” organic organizations will be far more likely to say, “We’ll find a way to do that for you.”

None of which can happen if employees and managers “respect the chain of command.” How can it? When everyone respects the chain of command, decisions flow vertically. The bigger the decision, the higher it has to go, and as a single no is an organizational no, most opportunities will die during the voyage through all the management layers.

So organic organizations don’t require a bunch of approvals. They do the opposite — they empower employees and managers at all levels to explore opportunities, and even more important, to collaborate with each other. By the time many opportunities become visible in the executive suite, they’re already turning a profit.

Sound better than the mechanistic approach? It might … to me, it certainly sounds like a more enjoyable place to work, that’s for sure. It isn’t, however, a “better” way to run a business.

What it is, is different, suited to a different sort of situation. Imagine you’re running, say, Shell Oil. You make your profits selling a commodity. Product margins are thin, and while there’s plenty of room for innovative product development, when it comes down to where you make most of your money, profit and success come from maximizing throughput and minimizing unit cost.

It’s proof once again, as if more proof were needed, that the great architect Louis Sullivan gave the best advice in the history of design: Form follows function.

Any design advice that conflicts with this principle will be right only by accident, and is far more likely to be wrong.

Comments (3)

  • My IS/IT group used to be very organic as was the business.
    As the company aged and expanded,
    its becoming less and less so.
    We now have “routing forms” where
    people sign off that they’ve reviewed
    a document. It used to be a matter
    of course that if a document needed to be
    seen by a group, it was without the need of
    a routing form. This routing form has become
    more and more complex to the point where it is no
    longer completely understood.

  • A nice series of posts, Bob.

    The “perfect” mechanical organization can suffer from impedance mismatch (see The Goal, by Eliyahu Goldratt), where each black box attempting to optimize itself creates problems up/down the line. An optimized whole implies that some processes must operate sub-optimally.

    So there still needs to be some global thinking, even in the machine.

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