Magazine article Management Review

Decentralization; Rebuilding the Corporation

Magazine article Management Review

Decentralization; Rebuilding the Corporation

Article excerpt

Managers had better assume that the skills, knowledge, and tools they will have to master and apply 15 years hence are going to be different and new.... And only they themselves can take responsibility for the necessary learning and relearning, and for directing themselves. "

-Peter F Drucker

A.M.A. Course Catalog, 1986

It used to be easy to visualize what a company should look like-it should be shaped like a pyramid, with the CEO on top. Power, responsibility, decision-making authority, and money trickled down from the man at the summit, who ran things with a firm hand.

Present that scenario to most modern managers, and they would be horrified. This rapidly disappearing structure is at odds with a pervasive trend toward decentralization-assigning greater responsibility to a company's separate business units. INVOLVEMENT AND INNOVATION

Arlene johnson, vice-president of programs at Catalyst, a New York-based research and advisory organization that helps corporations foster the career and leadership development of women, sees most companies either working toward decentralization or adjusting to the changes wrought by it.

johnson explains: "I see the move toward decentralization as a way for managers to be closer to the action. There is less tolerance for hierarchy, and more power, autonomy, and entrepreneurial spirit further down the line than ever before. Decentralization is appropriate for our times. There's an increasingly competitive climate for business, a need to penetrate global markets, a need for more involvement of employees at all levels, and a desire by people to feel responsible and involved with what they're doing.

"In the upper echelons the opportunities are really exciting. While before each company had only one CEO, in a decentralized company there's a chance for 50 or even more people to be CEOs of their own, smaller businesses. It leads to a lot more innovation."

Johnson emphasizes the importance of separating the concept of decentralization from geography: "It's entirely possible to either have a centralized organization with sites all over the world, or a decentralized organization all in one place. It's a question of reorganizing accountability rather than where you are physically."

She believes a more decentralized organization creates an environment where there's freedom for experimentation and innovation. For example, trying out innovative human resources policies, such as extended parenting leave, part-time work, work at home, and job sharing, will be easier at a company that's made up of many small businesses. "Trying something on a small scale is relatively risk-free for a big company. If the experiment is successful, other parts of the organization may adopt it," johnson says.

How does working in a decentralized environment affect employees' opportunities for upward mobility? johnson comments: "From a career-advancement point of view, decentralization can be a double-edged sword. Every manager is closer to bottom-line responsibility, so success and failure are more readily visible than in a centralized company. You need to be a risk-taker if you want to succeed in a highly decentralized organization." DECENTRALIZING AT CLAIRSON

Clo Ross, administrative vice-president of Clairson International, a manufacturer of household and commercial wire storage products, sits near the top of a lean and mean" corporate structure composed of herself and two other corporate vice-presidents reporting to a CEO.

Clairson, with its headquarters in Ocala, Florida, employs approximately 1,700 employees. Its household products division has nine locations in Ocala and one in Reno, Nevada, and the commercial products division has facilities in Georgia, Florida, Nevada, California, and Iowa.

Ross explains how Clairson functions: "The presidents of the two major divisions . . . go through a planning cycle each spring to devise next year's business strategy and a three- to five-year plan. …

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