In a couple of years I have had the opportunity to live through the full cycle of going from centralized to a decentralized organization. Or rather I’m in the middle of moving in to a decentralized organisation. But as so often the pendular tends to swing a bit to far when performing these type of changes. In both cases one of most challenging tasks are to manage complexity.
Id like to start with Ashby’s law:
Ashby’s Law concerns the relationship of a control system to the system it attempts to control. One version of Ashby’s Law is in the box at right. Ashby’s Law tells us that a complex system requires a complex controlling device. Conversely, simple systems require only simple controllers for successful operation.
So from my experience moving towards a centralization you try to improve efficiency by similarity in processes and better utilization of expertise. Decentralization is about speed and productivity of the team. So dependent on which business you belong to and the risk your business is affected by disruptive technologies you focus on the one or the other.
If you are a leader in your area, you can not sit back and watch, you need to constantly move so here the decentralization is probably the better option.
Back to complexity. Both central and de-central approach introduces complexity but on different levels. Production units tend to benefit from decentralization when it comes to complexity, the autonomy decentralization brings with it makes decision making faster. But looking higher up in the organization handling and controlling the whole organization becomes much more complex. Still if you are a leader in your field this is the only way to continue to lead. This is more like herding cats.
Decentralized it’s the other way around managing the organisation becomes easier but to the cost of speed.
This is something Yves Morieux describes very well in this video. He tears appart the classical business school dogma to create middle offices to handle complexity. This is the wrong way to do it since it only increases the complexity even more. I also like his focus on the manager role. I especially like his description of the manger role.
The role of a manager is make people do what they would not spontaneously do!
My favorite Professor Dr. Peter Kruse goes even deeper into the field of how to manage complexity. His take on complexity is based on his combined experience in psychology and brain research and later becoming a manager for a company. He quickly identified that structure an behavior in a company were similar to the human brain. I hope that I with time will manage to write a bit more about him. For german speaking audience this 45min video is a very good starting point. One his main point is that management need to adopt to changes in the society to be able to keep up. Planning everything is a thing of the past. The increasing democratization of information, the exponential increase of complexity and the dismantlement of hierarchies needs a new type of management which utilizes the collective intelligence.
So my conclusion is if you want to lead, it is important to focus on reducing the complexity for the team bringing direct value to your customers and as manager nourish and take care of the collective intelligence.
I have collected a series of videos touching upon this theme on my Youtube channel.