Fred, have a look at our operating model. Should we centralize or decentralize?
Wasn't the first time I got this question. And the first 2 things an OD consultant would do is:
Wasn't the first time I got this question. And the first 2 things an OD consultant would do is:
1. Benchmark against other companies in your industry and region
2. Google for business cases, articles and studies on centralization and decentralization
But I gave up on Google long time ago and don't trust in OD consultants (although I am myself a consultant half the time), because best practice doesn't matter in these type of cases.
So what was my response? And by the way, don't use this as best practice ;)
Look at your organization as follow:
1. There are functions that control, these need to be centralized due to the nature of the roles within these functions.
2. There are functions that develop and produce. If your industry is simple by nature and your product universal for all markets, keep it centralized. If innovation is core, then decentralize it by region or segment.
3. There are functions that are supporting the processes. I advise a hybrid model where you a) centralize the units that look at effectiveness, or so called continuous improvement of the process and support (your center of excellence). And b) decentralize the support processes to ensure efficient execution and close response time to the front functions like sales and marketing.
4. The functions that sell are by nature close to market (except if you are Amazon) but that wouldn't be fully true because even close to market principles apply for e-commerce.
In addition I always highlight the risks and opportunities of centralization of core control, product and process:
1. Centralization increases complexity of the decision making. Why? Because the dealing with decentralized functions (and most organizations are developing themselves to become decentralized to reduce the show stopper called "control") require dual and triple reporting lines from department to group/holding structures.
2. Centralization allows high control on process and execution, but also control on cost. But the high effective central control is conflicting with business values that encourages innovation, entrepreneurship and self-deployment of staff and teams (strong statement isn't it?).
2. Google for business cases, articles and studies on centralization and decentralization
But I gave up on Google long time ago and don't trust in OD consultants (although I am myself a consultant half the time), because best practice doesn't matter in these type of cases.
So what was my response? And by the way, don't use this as best practice ;)
Look at your organization as follow:
1. There are functions that control, these need to be centralized due to the nature of the roles within these functions.
2. There are functions that develop and produce. If your industry is simple by nature and your product universal for all markets, keep it centralized. If innovation is core, then decentralize it by region or segment.
3. There are functions that are supporting the processes. I advise a hybrid model where you a) centralize the units that look at effectiveness, or so called continuous improvement of the process and support (your center of excellence). And b) decentralize the support processes to ensure efficient execution and close response time to the front functions like sales and marketing.
4. The functions that sell are by nature close to market (except if you are Amazon) but that wouldn't be fully true because even close to market principles apply for e-commerce.
In addition I always highlight the risks and opportunities of centralization of core control, product and process:
1. Centralization increases complexity of the decision making. Why? Because the dealing with decentralized functions (and most organizations are developing themselves to become decentralized to reduce the show stopper called "control") require dual and triple reporting lines from department to group/holding structures.
2. Centralization allows high control on process and execution, but also control on cost. But the high effective central control is conflicting with business values that encourages innovation, entrepreneurship and self-deployment of staff and teams (strong statement isn't it?).
And one important note to complete my reply:
Always make sure you map the core values of your organization (implemented or wish list values) to the way you like to structure the organization! They might be conflicting with the way you like the organization to operate.
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