Leadership Decisions: To Centralize or to Decentralize

…that is the question. All jokes aside, this is one of the questions that every leader needs to answer eventually. That is why this is the first topic in my leadership blog series. As the blog evolves, I’ll be sharing topics that leaders need to be able to answer. Whether you’re already a leader or are an up-and-coming leader, my hopes are this series will help you become the best leader possible.

Now, facing the challenge of trying to determine when to centralize versus not is a difficult question to answer. But in this blog, we’ll address some of the scenarios, that can help you make the determination of when to choose one or the other. One of those scenarios is when anything new is introduced, someone has to be the person, who learns the technology, tool, or process. That person then goes on to be the Subject Matter Expert or SME. As a SME, you kind of have a few different options:

1. You are the go to person
2. You teach others

Both of these approaches have pros and cons so today we’ll discuss them in depth. To centralize or not to centralize, that is our question?

A Case For Centralization

When it comes to centralization, there are a couple of factors that you should look for:

1. A highly specialized skill
2. Low knowledge of that skill in an organization
3. Developing new tools or processes

These are just a few of the signs that lead to an obvious decisions to centralize. Note, these aren’t the only cases, but there the ones that you most commonly see leaders and teams shift to centralized model.

A highly specialized skill typically falls to centralization because the training time to benefit cost more than it’s worth. For example, let’s pretend I’m a move director and I have an one animator and an intern. If I know the intern is leaving in a month or so, the time to train them is not worth the investment. I might instead pair them with marketing or a different area they might be able to pick up faster. In this example, animation is the highly specialized skill leading to a centralized model.

Low knowledge of a skill within an organization is a similar but different scenario. Let’s say you own a construction company, and you’ve got 5 of your 20 people who grew up working plumbing jobs with their parents. Your company is able to meet all its deadlines without an challenges. At this point there’s a small amount of knowledge but there’s no stress to spread that knowledge because your business needs are being met. While it looks similar to the specialized skill scenario the difference is in need. You don’t need your entire staff to have this knowledge because you’re meeting your needs.

Developing something new is a little different from the first 2 scenarios, because this one involves learning something. As you’re learning you become a small team. That small team becomes governance for the organization or team using the tool, technology, or process. With any new tool, process, or technology you have to troubleshoot issues that come up for the team. A real life example of this can actually be seen from a dentist appointment I just had. One member of the staff was teaching the other how to check-in me in correctly. That new process need oversight aka governance to make sure patients got in and out quickly.

Now, you seen benefits from centralizing, but what about cons. The cons come in the form of slowing down processes. In the first example, your animator gets sick, your production stops. In the second example, as your business grows so does your need to hire or train additional plumbers. In our last example, if your governance team is involved it’s going to take more time. Aka centralization means more time to get things done. While there are other cons, these are some of the main reasons organizations and leaders want to break up these monolithic centralized organizations.

The Decentralization Decision

When it comes to decentralization the factors aren’t just the opposite but the do become pretty close. These are some things to look for when it comes to decentralizing:

1. Generalized skills
2. A need for speed
3. Well established process, tool, or technology within a organization

Generalized skills are things that most people will know and can do. For example, the website Canva.com enables most people to create simple flyers and designs. While this used to be something you might have hired a graphic designer, now, on their platform you can create a team site, set your brand colors, and give everyone the flexibility to create designs (within reason). In other words, Canva is enabling graphic design to be more generalized then it used to be, allowing it to be decentralized.

As a business grows it has to be able to scale quickly and that’s where decentralized organizations excel.  Rather than rely on only the skilled people within your org, you’re relying on the talent in your org.  This only works if you put guardrails for the organization to follow.  For example, if I know I want to increase usage of a product, my guardrail might be: We need features that draw users to our products, as long as it doesn’t degrade our user experience, and is legal, we’re seeking ideas to drive users to our products.  In this example, we’re putting a guardrail to prevent degregation, but everything else that pushes user engagement is fair game.  Ultimately, this allows us to start moving faster because everyone in the organization is empowered to make a difference.

When you have a highly knowledgeable team, you can loosen the governance of a process, tool, or technology.  For example, you wouldn’t have a team to review every PowerPoint created within the organization right? The idea is as a team gets more versed in what they’re doing you loosen the reigns.  By decentralizing at this time, you increase efficiency by saying we trust you to drive great value on your own.  While this might seem simple, the idea of trusting your people empowers your team and leads them to want to make a greater impact.

Now you’ve seen the benefits of decentralizing, but what about the cons?  One of the first would be inconsistency across an organization.  While most people might be consistent, you might see others don’t develop or design things that match expectations.  While some randomization might be a benefit, it’s not always an advantage.  The other would be maintaining quality. Organizations are not static so while at first quality is higher and easy to maintain, that can diminish as people exit and enter the organization.  This is a life long challenge for management, when do you have to reign a team in (centralize) versus when do you give them freedom (decentralize).

Summary

There’s a variety of factors that can effect centralizing or decentralizing. Things to consider can be organizational knowledge, efficiency, and quality just to name a few. Need consistent quality? Centralizing is probably your best bet. Need to move fast? Decentralizing offers you that opportunity. Overall, I hope in reading this, you’ve got a better understanding of some of the things to consider. So, with this knowledge take a look at how your team or organization operates, think are we centralized or decentralized? You may be surprised by what you find, might work best!