When Centralized Decision Making Makes Sense

many arrows showing the advantages of Centralized Decision Making

Efficient and Effective Decision Making Cultures Vary
The location at which companies make decisions – centralized decision making or decentralized – matters.  Sometimes it makes sense to centralize decision making from a strategic and cultural perspective.  Other times it makes sense to decentralize decision making.

Corporate Culture Defined
We define corporate culture as how and why things truly get done. Culture can be measured by understanding the way people think, behave and work.  A company’s culture represents what a new employee needs to learn to be “accepted as a member” and what makes the company “feel and act” like itself.

While often invisible to the eye, culture becomes very apparent when people act in ways that misaligned accepted cultural norms. How a company makes decisions can say a lot about its culture.

Decision Making Challenges
Thanks to the growing complexity that most leaders face, not only has the number of decisions that must be made increased, but leaders also report that it is more difficult to cleanly delegate decisions to their subordinates. A recent McKinsey study found that 72% of senior-executives thought bad strategic decisions either were about as frequent as good ones or were the prevailing norm in their organization. It is not easy to have a strong culture if the way you make decisions is flawed.

So how do you know which circumstances should dictate which decisions?

Centralized vs. Decentralized Decisions
When a decision is centralized, it is typically unilaterally mandated by a central, usually high-level, authority.  Decentralized decisions are, instead, made at a more local level by frontline employees who are close to whomever will feel the impact.  Neither decision making approach is inherently “right”.  The choice of which decision making mode is best completely depends upon the situation and your goals.

 When Centralized Decision Making Makes Sense
There are four factors to evaluate where a decision needs to be made and these will help you choose the best mode of decision making for the specific situation.

  1. When the Impact is High and the Scope is Wide
    When a business is faced with big opportunities, issues or threats with potential company-wide impact, it is often best to have your top leaders make the final decision. In this instance, it is important to have policies and procedures in place to help ensure that there is alignment throughout the organization.  For example, one client decided that all decisions with an impact of greater than $250,000 needed to be approved by the CEO.
  2. When Standards and Uniformity Matter
    Every organization needs to operate with some common standards and procedures. It makes little economic sense to have duplication of effort, misalignment, or inequity.  One overall authority in areas such as payroll, procurement, legal, quality assurance, and safety can often improve economies of scale with centralized decision making.
  3. When the Long-Term and the Greater Good Matters
    While decentralized decision making can help speed the decision making process by empowering the frontline, centralized decision making is often required to create longer term thinking for the greater good of all. Whenever there are shared or limited resources (i.e. the need to hit short-term quarterly targets), the self-interests of each stakeholder can advocate for decisions that may be positive in the short term but have negative longer term consequences.

    For example, one client made their HR function a shared service center which defunded a leadership development program that was essential to building their talent pipeline.

The Cultural Implications of Centralizes Decision Making
If your company needs to make centralized decisions to best execute its strategy, look for strong and decisive leaders, agree upon what decisions need to be mandated versus autonomous, and delineate your decision making criteria when decisions are announced.

The Bottom Line
While effective leaders must be able to delegate decisions to get work done and to empower employees at all levels, certain situations and strategies require centralized decision making.  You will likely still need to actively involve key stakeholders in the process to get buy-in and sustainable results, but do not be shy about mandating some key decisions.

To learn more about effective decision making, download 3 Steps to Set Your Team Up to Make Better Decisions

Share:
Facebook Twitter Google+ Email LinkedIn

Comments are closed.

LSA helped to meet the needs of my teams within a very narrow timeframe. My team walked away with highly useful management tools and practices. LSA saved us time in delivering the right solution for our specific needs.

Sandeep Kumar
Director, Software Engineering, EPG

We contacted LSA to help us with customized management development. LSA worked with me to identify a solution that would meet our exact needs. We decided to start at the top and ran the program for our executive team. It was such a great success that we hope to roll it out companywide. We look forward to a long-term partnership with LSA Global and their team of experts.

Barry L. Byrd, SPHR
Human Resources Manager

Our company engaged LSA to do a specialized “train the trainer” program, and the consultant’s performance outdid our exceptionally high standards for such a program. Very crucial to the success of this program was the work done upfront to discuss our needs and to interview key members of our organization so that the program specifically met our goals. Our facilitators continue to comment on the success of the program. Thanks also for the follow-up.

Frank Abbott
Chief Financial Officer

SeaTel has found our partnership with LSA Global to be very valuable and beneficial. We turned to LSA to customize a supervisory/leadership solution to meet our needs. LSA delivered a customized top quality solution. I’d recommend LSA Global to any company looking for a best-in-class training and consulting partner.

Kortney Riddle
HR Manager

LSA is an instrumental training outsourcing partner in helping us to build management capacity and strategically invest in our people. Their flexibility, depth, and breadth of expertise allows us to deliver top quality solutions that are directly tied to key business plans. Their ability to custom design, deliver, and evaluate our Management Curriculum has been excellent. They are true business partners and a pleasure to work with.

Margaret M. Mader
Vice President, Human Resources

Hyperion

For our go to training outsourcing partner, LSA provides exactly what we want. As always, they deliver outstanding work!

Elizabeth Siebert
Director, Organizational Excellence & Development

Intuit

Each program is preceded by an assessment of the participants. The course is then designed to fit the specific parameters and needs of the group. The highly interactive delivery is provided by recognized experts in their fields. On the spot coaching is provided during the program and each participant receives individual follow-up after the course. Courses can be delivered in-person or virtually. Given the nature of Cisco’s business and the way we operate, these remote workshops are a must for anyone who joins our company. Their work is eye opening. Great content and fantastic delivery.

Frank J. Kuypers
Business Development Manager

Hyperion has a commitment to lifelong learning. LSA helps us provide the right business sales training, management training programs, and leadership development programs at the right time to meet the needs of both individuals and departments. I especially appreciate their ability to listen to my needs and recommend the appropriate facilitators, solutions and content.

Sarah Parks
Senior Project Manager

Hyperion

Avon’s success is dependent on strong relationships among our Customers, Representatives, Associates, and outside resources we hire to help us meet our business objectives. We were very pleased with the results from working with LSA Global to design and facilitate a custom program for our events management team. LSA demonstrated responsiveness, flexibility, and an innovative approach to working with us.

Deanna Rudnitsky
Senior Manager, HR Destiny Sales Region

The Next Generation Management Development courses have helped me communicate more effectively with my peers and teammates. By utilizing effective communication techniques such as clarifying and confirming, and asking open ended questions, I have been able to clarify and understand information in situations where I would have otherwise asked limited questions and made false assumptions.

Robert Breckner
Firmware Engineering Manager

LSA exceeded all my expectations. We interviewed 7 potential training and consulting partners and selected LSA due to their expertise, flexibility, and breadth and depth of solutions. We were able to construct a management training course from the modules most appropriate to our needs, and are able to provide additional training from their well developed portfolio of experts. Our managers galvanized as a team throughout the session and are better prepared for the rigors of a competitive market.

Mitch Mandich
CEO

Edify

LSA Global’s consultant brought a fresh perspective to our behavioral based interviewing strategy for two key executive positions we needed to fill, and their consultant helped us develop questions that produced a much deeper understanding of candidates’ capabilities. I am confident that the two new executives joining our organization have the right skills to add significant value. Throughout the process LSA was also very responsive in dealing with short lead time requests.

Because of the unique nature of our business, Excel is a core application in our accounting organization. After three attempts to find an Excel consultant who is capable of helping our finance team integrate advanced applications into our work processes we found LSA and Alex. He was not only a “Real” Excel expert but was masterful in helping us identify where to use Excel applications in our processes to increase our group’s efficiency.

SPO Partners & Co
Kim Silva, CFO

I had been working with LSA for many years with my prior company. Currently, I’m with a company who hadn’t done much basic management skills training. After identifying and presenting a program recently, our managers are excited and talking in the halls about the great experience. LSA saves us time in delivering the right training for our needs.

Phyllis Moracco
HR Director

What a refreshing change from the half-baked psycho-babble you normally get from training and consulting organizations. LSA gives you the practical and results-oriented assistance you need to define and reach your goal.  They provide a results driven plan – not just a temporary fix. They are great to work with, and even more importantly, they “get it!”

David Fiano
Vice President Human Resources

We recently partnered with LSA Global to offer our Supervisors and Managers a customized two-day management training program. Everyone who attended said it was by far the best management training program they had ever attended. The content was rich and highly interactive. The case studies were relevant. Each participant walked away from the training much better equipped to lead their teams.

Jeff Coon
Director of Human Resources

Evaluate your Performance

Toolkits

Toolkits

Download key published insights and tools from industry experts highlighting best practices in the areas of talent, strategy and culture.

More

Health Checks

Health Checks

Want to know how you stack up against leading organizations?  Receive a complimentary benchmarking analysis courtesy of an LSA Expert.

More

Whitepapers

Whitepapers

Get up to speed on timely solutions critical to your business. Published by LSA Experts based upon client feedback and key industry trends.

More

Methodology

Methodologies

First we identify the key metrics you want to improve. Then we assemble a dedicated team of elite experts who have successfully solved similar problems with similar clients.

More

Blogs

Stay up to do date with the latest information on how we help high growth companies align their culture and talent with strategy.

More

Case Studies

Client Case Studies

Real world consulting and training approaches from LSA projects, providing insights on how your company can outperform the competition.

More