Why Decentralize?
Wished outcomes:
- – Flexibility in operations
- – Sensitivity to the client and the constraints
- – Empowered and accountable Professionals
- – Increase customer proximity
- – Approach internal services to users
- – Increase the time response
- – Countering the bureaucracy
- – Closer Service
- – Service more accessible
- – Better understanding of the constraints (link)
- – Information channel to the top executives
(http://sloanreview.mit.edu/files/2008/12/3822-ex2-lo7.png)
Obstacles when decentralizing:
- – Lack of skills (professional and management)
- – Top executive Anxiety
- – Political Pressure
- – Need for complex coordination
- – Running Costs, including coordination
- – Needs of interdependence (transverse)
Errors when decentralizing:
- – Decentralize more than necessary …
- – Lack or failure of coordination mechanisms
- – Specialty Logic (silos)
Intrinsic conditions for decentralization:
- – Maturity of actors
- – Skilled players
- – Mechanisms for complex coordination
- – Informal Networks
- – Safe staffing
- – Volume of activity sufficient
- – Policies / procedures well done
- – Operational Guidance vs . bureaucratic
Risks when decentralizing:
- – Bursting, rupture
- – Lack of consistency
- – Balkanization (closing small empires)
- – Ambiguity re authority
- – Ambiguity / displacement loyalties
- – Secrecy (blackmail)
Why Centralize?
Wished Outcomes:
- – Facilitate the global coordination
- – Increase compliance with institutional norms
- – Increasing security
- – Economies of scale
- – Supplementing the possible limited staff skills
- – Accelerate operational decisions
- – Improving the quality of business decisions
- – Facilitate real-time adaptation
- – Motivate staff operations
Direct Earnings:
- – Increased and easier business control by executives (orientations)
- – Security for the “stakeholders”
- – Simple Coordination
Intrinsic conditions:
- – Legitimate Authority
- – Competence content from leaders
- – Mechanisms / effective communication tools
- – Small or mechanistic organisation
Risks:
- – Bureaucratic , inertia, slow
- – Secrecy
- – Inadequate Decisions
- – Increased costs of system
ref: Pierre Collerette MBA’s HEC course