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To centralise or decentralise? Now that is the question

Which model is right for the new world of work? And how do organisations strike the right balance? 

Connected organisation

Are you a decentraliser or a centraliser? In visiting multiple businesses, I’ve been struck by the two-way split into which many organisation’s business models seem to fall.

The first, as typified by Associated British Foods, is very clear decentralisation. Each business leader is responsible for the culture and objectives of the division they lead. They see themselves as a multitude of businesses under one umbrella. Every business leader owns their P&L and their strategy, while the centre of the business sees its job as facilitator, challenger and standard-setting for overall corporate governance.

They are content to live with different ‘mini’ cultures within the overall group, believing this drives success through local engagement and quick response to local markets. What ties them together is a set of corporate standards around critical issues, which cannot be deviated from. However, they may miss out on delivering synergies from support functions or joined-up procurement.

I would rather see a tribal culture in my business, based on entrepreneurial ownership, rather than having a rigid framework

Other organisations are the opposite. Their approach is to centralise as much as possible, seeing it as a way to cut costs and complexity. Such businesses might offer a large and diverse range of services, but with a very centralised approach.

So, which model is right for a fast-growing, international business and, more widely, for the new world of work? And how do organisations strike the right balance?

This question is pressing for business leaders. The pace of change and the uncertainty around the global economy (not to mention Brexit) mean leaders need to create agile organisations that are ready to respond to commercial and market pressures. Established businesses need to be able to compete with newer entrants to the market, such as Chinese companies, or firms such as Lidl and Aldi in the supermarket sector. That means finding ways to be more efficient and letting local leaders be as close as possible to their people, operations and P&Ls.

Then there are changing demographics. Our workforces are ageing. Many senior leaders are close to retiring, but we lack the talent or expertise to replace them. We need to focus on more fluid and flexible succession planning, offering fast-track development opportunities for our brightest talent. The younger generation entering the workplace don’t want to feel like a number in a huge corporation.

These pressures suggest, to me at least, that thinking about our businesses as consisting of devolved and smaller units is the way forward. The organisation of the future will be made up of project-based teams: people coming together and dispersing to work on specific projects, dependent on their skills. We need to create more mobile talent, and opportunities for people in diverse and flatter organisations.

The challenge for HR professionals in this more networked organisation is to think about how we can connect our businesses to the world outside. We need to understand broader market trends, talk confidently about the workforce of the future and connect the two together.

I am starting to think I would rather see a tribal culture in my business, based on entrepreneurial ownership rather than having a rigid framework. This could be the end of the traditional organisation – and that intrigues and excites me.

David Frost is organisational development director at Total Produce and a member of The People Space Leadership Board. This piece first appeared on The People Space on 8 May 2017

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