Life of a Business Owner

To centralise or decentralise?

This is another classical decision that needs to be made.
You start your company centralised and organise everything around the processes in order to have better control, standardisation benefits and economy of scale. With time you start noticing that the way you designed your products is not taking care of some regional specifics, functions are not well coordinated, bureaucracy is blooming and you start thinking about decentralisation.

When you give more control and decision making power to those regions, allow them to create their own processes so that they can serve their customers better. And when they start tasting their freedom they want more of it. The local management want to take more control and to expand their influence taking over more and more functions from head quarters. Soon every region looks like a small copy of the head quarters with all the functions done they own way and the process starts in the opposite direction.

One swing of this pendulum can take a company from 3 to 10 years.

Things that push towards centralisation are:
1) Better control of company assets
2) Increase the efficiency of business processes
3) Increase investment attractiveness

Things that push towards de-centralisation are:
1) Being able to serve different customers differently, having product focus
2) Account for regional specifics
3) Increasing the speed of decision making

I don’t think there is a generic right way of doing it, you have to think about your context how to structure your organisation. You have a few possibilities there: 
1) structure around the processes
2) Structure around the products
3) Structure around the clients
4) Structure around the regions/sites
How do you structure your business? Share in comments…

Leave a Reply

Your email address will not be published. Required fields are marked *