 Live long enough, they say, and you'll see everything. Last evening Judith Meskill brought to my attention this post in CIO magazine describing The Decentralization Imperative. In it, writer Sue Bushell critiques a new book by MIT management theorist Thomas Malone entitled Future of Work: How the New Order of Business Will Shape Your Organization, Your Management Style, and Your Life.
According to Malone's colleague, Mitchell Resnick, human beings have an
inbuilt, subconscious tendency to assume that things are best managed
in a centralized way. Malone thinks that by "overcoming the centralized
mind-set", we can open ourselves up to the benefits of
decentralization, especially (this being a management book and all)
decentralization in business decision-making.
The article outlines four forms of decentralization:
- Loose Hierarchies -- with flat organization structure and
substantial autonomy granted to individual business units, subject to
overarching principles, review and budget control (e.g. consultancies,
universities, technology developers)
- Democracies -- where all employees, or all managers, get an equal vote on some or all key corporate decisions
- External Markets -- where most of the non-executive jobs
are outsourced to independent businesses and contractors, so all
'employees' essentially become 'suppliers', with the commensurate
rights and autonomy
- Internal Markets -- where each business unit, and even
individuals within business units, contract with each other as if they
were dealing at arms' length, so, every business unit and every
employee acts much like an autonomous business
Needless to say, Malone sees offshoring of jobs as inevitable and
desirable, and, as any regular reader of these pages will know, I think
that indicates he needs to get out of the ivory tower more and find out
how things work in the real world. Malone also sees decentralization as
driving the need for communication (including video/audioconferencing),
collaboration, opinion canvassing, and telework technologies. In the
real world, management thinks offshoring and outsourcing is the perfect
opportunity to reduce (and even outsource entirely) technology costs and infrastructure.
Those of us that have been around long enough have, of course, seen and
heard all this before. I've watched both business and government go
through at least three cycles of (a) "centralization is good -- it
brings economy of scale, rigour to the decision-making process, and
reduction of waste and duplication", and (b) "decentralization is good
-- it brings agility, customized solutions, appreciated autonomy,
empowerment and the benefits of an internal free marketplace for
people, goods and ideas". Sometimes large organizations are doing both,
in different areas, at the same time. Often, decentralized and
centralized systems are layered on top of each other, bringing the
worst of both worlds. And even more often, compromise and complexity
produce hybrid structures that prevent the benefits of either
decentralization or centralization from being realized.
The most obvious (but certainly not only) example of this is in
government, where there is a constant tension between federal, state,
county, and municipal governments for power, authority, and dollars.
The result is massive inefficiency, waste and duplication, and
incompetent decisions because those with authority are too far removed
from the problem to see the optimal solution. The same horrendous,
debilitating, bureaucratic state exists in most large corporations --
different decisions are made at different levels, there is constant
friction between the levels, and decisions are made by those
far-removed from the problem.
The problem is not one of level of autonomy, resource allocation or
decision-making. The problem is inherent in large organizations, public
and private: As the size of the
organization grows linearly, the complexity, and opportunities for
conflict, misallocation, inefficiency, error, miscommunication, fraud
and sub-optimal decision-making increase exponentially. Whether
these megaliths are centralized or decentralized really doesn't matter
-- wait long enough and they'll cycle around anyway. The only reason
large organizations are so dominant in our society is that size is
power -- power to unduly influence governments and consumers, power to
form oligopolies and trusts, to fix prices, to monopolize sources of
supply, and to buy, sue or crush smaller competitors out of existence.
The solution is not organizational, but political. We need laws that
will restore corporations to their original purpose (the effective
raising of inexpensive capital), revoke their "rights", and make them
once again responsible to society as a whole, not merely to the
investors and speculators who momentarily own their shares. The
inevitable consequence would be the rapid break-up of large
corporations, because of their inherent inefficiencies, into truly autonomous small, agile, responsible, community-based businesses. That would be real decentralization. That would be a truly free market, not the illusory free market that Mr. Malone espouses.
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