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What is Decentralized Decision Making?

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Last editedJan 20212 min read

Your decision making processes can either improve your company’s progress or impede it. They can empower your employees and grant them more autonomy, or bind their hands in protocol. As your company grows, it risks becoming more cumbersome and less adaptive to the ever-changing markets of the 2020s. Decentralized decision making means just that — empowering employees to make more strategic and operational decisions on their own without managerial hand-holding. 

It may seem like ceding control. But properly implemented, it can actually make for a more responsive and agile company with an empowered and highly motivated workforce. It can create the kind of dynamic workplace culture that attracts the employees who can take your business to the next level. But it can also lead to huge leadership challenges and a rudderlessness that leads to catastrophic losses. 

How to Implement Decentralized Decision Making Effectively

Decentralized decision making can enhance your corporate ethos and operational identity. Or it can obfuscate it. You have to find the perfect balance between disseminating autonomy and retaining all the things that make your business unique.

There are 4 operational steps that will make it easier and more effective to decentralize your decision making:

  • Obtain and retain knowledge

  • Create operational efficiencies

  • Continually increase core competencies

  • Never stop developing the team

These need to be interwoven into your organization’s infrastructure. The knowledge of your corporate ethos and operations (how and why you do what you do) are what will prevent your business from losing its identity when decentralizing decision making. 

Creating operational efficiencies will keep your business agile and prevent growth from becoming cumbersome. Meanwhile, a strong focus on core competencies and ongoing employee development means that decision making is always in safe hands. 

Decentralized Decision Making in Practice

If you’re looking for a good example of decentralized decision making in practice, think back to 1993 when Lou Gerstner became the CEO of IBM. He inherited what was regarded in the business world as a lumbering behemoth of a company. At the time many within and outside the company felt that only by breaking itself into smaller companies could IBM regain the speed and flexibility that it had lost.

But Gerstner felt otherwise. He believed that the company’s size and capabilities were worth retaining. As such, he kept IBM’s organizational structure as it was, but loosened the structure significantly, implementing decentralization without it being at the expense of the IBM brand. His view was:

"Let's decentralize decision making wherever possible, but . . . we must balance decentralized decision making with central strategy and common customer focus."

Advantages of Decentralized Decision Making

Get it right, and decentralized decision making can bring a range of advantages. It can ease time constraints on leadership, giving managers more time to focus on strategy and spend less time putting out operational fires.

It can improve reaction times, allowing your company to deliver the kind of service that you can grow and build your brand upon. It helps to create a workplace culture that values, celebrates and shares expertise, and helps employees feel empowered and motivated. 

Disadvantages of Decentralized Decision Making

Of course, there are some potential disadvantages of decentralized decision making. It can cause company messaging to become diluted and lead to operational inconsistencies that could compromise your brand. 

Get it wrong, and you risk a lack of direction and a potential dilution of everything that makes your business special. That’s why it’s so important to use the 4 steps mentioned above to create an infrastructure that naturally lends itself to decentralized decision making. 

How could you implement decentralized decision making to make your team more autonomous, and your operation more efficient?

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If you’re interested in finding out more about decentralized decision making, then get in touch with the financial experts at GoCardless. Find out how GoCardless can help you with ad hoc payments or recurring payments.

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