Uniformity Needs Central Control; Innovation Needs Front Lines

"Businesses that need to operate uniformly wherever ever they are-McDonald's or Wal-Mart, for example-must ple-must be shaped by relatively few people. In such a business, centralized decision making is a very sensible approach. Businesses that serve diverse markets, on the other hand-or that experience very different conditions in different locations, or that rely more on high levels of innovation and flexibility than on uniformity-are best shaped by a wider array of people.... That is, by the people closest to where the work actually gets done. Those businesses must tell people on the front lines to "trust your instincts." And businesses that tell their people to "trust your instincts" generally should be decentralized. A decentralized structure pushes the power to set strategy, spend money, make decisions, and create policies out toward the marketplace. It promotes motes local autonomy. Managers within companies can look at the operations ations for which they are accountable in much the same way. In your department or work group, what's more important, uniformity or innovation? Consistency tency or flexibility? If your success depends heavily on uniformity and consistency, centralized decision making may be justified. If your success relies more on innovation and flexibility, you should make a conscious scious effort to push decision-making power down."

"I'm not so much a champion of decentralization centralization as I am an advocate for decisiveness. Managers at all levels need to assess what is most crucial cial for the operations they manage and-based on that assessment-choose where the locus of decision-making making power should reside. Then they must implement ment that choice thoroughly, and stick to their choice over the long term."

"We have told our managers to "trust your instincts"-and we have meant what we said. We've urged them to confer the same kind of decision-making autonomy to their people-to make their own decisions based on what they think is best for the business-and we have never backed off our commitment. Before making your choices, you must think through which decision-making structures will best serve the operations you manage. We chose decentralization to gain the innovation, tion, speed, and flexibility that stem from operating like twenty-one smaller companies instead of as a monolithic corporation. We're willing to live with the redundancies and "inefficiencies" that go with that choice."