August 14, 2020

Why I Am A Big Fan of Decentralized Decision-Making

Organizational structures have moved from hierarchical models to flatter and more egalitarian structures to respond to the demands of today’s fast-paced business environment. 

The competitive business landscape has also compelled organizations to deliver value in the shortest sustainable lead-time. While centralizing decision-making might seem like a good way to have greater ‘control’ over actions, unfortunately, it impedes the speed of decision-making that organizations need today. The only way to deliver value fast is by decentralizing decision-making.

I have been a big fan of decentralized decision-making. As the CEO of the organization, my focus has always been on defining strategies, aligning the operations with the strategy, and then getting the right people to execute it. Once the right people have been assigned their tasks, I have consciously stepped away from the task and have let them handle it. Of course, I have extended help, but that has only been when asked for. 

This has been a practice across our organization since we firmly believe that if you tell people how to do their job, especially when you have delegated the task to the right candidate, you are guaranteeing failure. 

Trust, you see, is a big motivator for employees across the board. And a sure shot way to show your employees that you trust them is by allowing them to do their work, their way. 

Some of the other reasons why decentralized decision making is a part of our organizational culture are reflected below.

Increase responsiveness and reduce delays

Organizations are constantly looking at opportunities to take the right actions faster to respond to opportunities or threats. Centralized decision-making demands mid-level managers or individual teams to acquire permission before they act. Writing up requests, proposals, or presentations or filling up forms, submitting them for approval, and then waiting for the approval to arrive eats into precious time. The responsiveness of the organization then rests on the responsiveness of the decision-makers (top management) who might not have the time to stop and ponder on every request proactively.

Decentralized decision-making gives managers and individual teams the authority and tools to make decisions on issues, opportunities, and problems. It helps decisions to pass across the organizations by making managers and individuals a part of the business process or the solution. This becomes even more relevant in today’s organizational narrative where remote and distributed teams and complex and interdependent projects are the new normal.

The less vertical the chain of command, the faster decision-making happens.

Better quality of decisions

Today’s business landscape has no room for bad decisions. However, as products and services become more complex, job roles and the pursuant decisions demand greater knowledge and expertise. High-level views need to be replaced with expert opinions to improve the quality of decision-making.

Decentralizing decision-making puts the ball in the experts’ court. The expert knows all the checks and balances to assess and the impact of each action. Top management, for example, might demand QA to hasten the process or omit something like end-point security to go-to-market faster. But when decision-making rests with the QA head, they will know the impact of this decision. Hence, they will not move this way because it is essential for product security, especially as the digital economy strengthens, and the cost of low security becomes higher.

Giving decision-making authority to managers and other associated personnel makes sure that decisions are coming from experts who are most likely to make the best choices for the organization.

Increased efficiency and reduced duplication

Decentralized decision-making is also a mainstay for most contemporary and forward-thinking organizations as a tool to increase the efficiency of decisions and reduce duplication of work. The latter becomes especially pertinent today as distributed and remote teams become an indelible part of the enterprise narrative. 

When decisions need to be faster, we need to reduce duplication of work. And having a centralized decision-making structure only increases duplication – When you have the right set of people to make the right decisions, having the top management vet decisions is also a duplication of work.

Get the right people with the technical and professional expertise to make the right decisions and eliminate time waste by jettisoning duplication.

Develop ownership in teams

Decentralizing decision making is also a great way to build ownership in teams and individuals. Decentralization makes the team/individual responsible for their actions. The buck stops with them and cannot be passed further along or shifted elsewhere.

The greater the level of autonomy over decisions, the higher the levels of ownership. It is because organizations then give employees the opportunity to build their wins. It gives them a sense of importance as they can use their knowledge and experience to implement their ideas. This autonomy provides an empowering push to the employees towards higher levels of ownership.

Finally, and most importantly, I lean heavily towards decentralized decision-making because it accelerates the capacity to innovate. With decentralized decision-making, employees spend time doing productive work, ideating and identifying opportunities, and implementing those innovative ideas rather than spending time filling up forms and taking approvals. Whether it is a new product idea, a marketing or sales strategy, or identifying new business opportunities, decentralized decision-making helps in delivering value when it matters – Not after the opportunity has passed.

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