Ken Kaufman's picture

Centralize or Decentralize

As businesses grow their operations to new states, countries, and continents, they have to grapple with the question of running their business as a centralized operation or as decentralized business units. Centralized businesses grow large, but their hierarchy grows too, usually into a complex web of political, silo-ed, unproductive bureaucracy. Yet the benefit of being able to control decision-making from the top can justify any other collateral damage.

On the other hand, decentralized companies push decision-making to the lowest levels possible, trying to create 'entrepreneurial' thinking in geographic regions or along other segmentation boundaries. Maintaining corporate culture and relinquishing too much control can be some of the challenges of this model.

As a business decides which philosophy to follow, one of the biggest issues I've seen is when centralized companies try to hire employees that only thrive in decentralized environments, and vice-versa. So, regardless of which model you employ, the key is to hiring employees that have thrived in similar systems and will fit into your business structure. Hiring an entrepreneurial individual into a centralized business will usually end poorly, just like bringing a corporate man, who is used to lots of infrastructure and thick-layered processes, into a small, humble business unit will go sideways almost as quickly.

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