The Friction Between Centralized and Decentralized Decision-Making
The tension between making decisions on the ground or in the field as opposed to by a centralized source is a healthy one.
Giving those leaders or producers closest to the issues and problems the ability to make decisions that affect them results in more practical and timely solutions.
When field leaders feel empowered, they get things done. Their action-oriented mindset keeps the enterprise agile and opportunistic.
The downside of decentralizing decisions is all about consistency and redundancy.
Making spot decisions on the ground usually means employing different solutions and actions to common problems faced across the enterprise.
With so many different choices and actions, consistency suffers, often confusing customers, end-users, and even seasoned team members.
And without common and consistent solutions and processes, each sub-group or producer consumes resources inefficiently. They reinvent the wheel over and over when a universal choice would avoid replication of resources and reduce costs.
On the other hand, organizations that control most decisions at the enterprise level demotivate and slow down those in the field.
Instead of acting on opportunities and problems, field leaders in a top-down model must wait for answers.
The bureaucracy that gets created to avoid giving too much authority to those on the ground is both costly and highly inefficient.
Given this dilemma, which decisions organizations choose to centralize and decentralize is of critical importance.
Whereas enterprises 50 years ago preferred centralized decision-making, a shift in thinking has encouraged contemporary organizations to embrace both centralized and decentralized decision-making and to use the tension between them as an advantage.
The best organizations in the world have moved to a model of decision-making that gives leaders on the ground “local authority” but keeps strategy and oversight the province of centralized leaders.
Local Authority and Global Strategy (LAGS) is the design used by the world’s most effective organizations.
What great organizations have learned is that giving decision-making rights to those on the ground makes the enterprise more effective when the strategy and functional support are controlled and decided upon from a centralized place.
Applying this thinking and approach as a model to virtually any organization produces a healthy debate about how much “local” authority is best and at what point centralized decision-making creates too much bureaucracy and inefficiency.
Where do everyday decisions get made in your organization? Where is the balance between centralized and decentralized decision-making?
Thinking through this tension and arriving at the best workable answers is what great organizations do. Effective leaders never forget that at the core of organizational life and leadership lies the idea of what to hold onto and what to let go of.
If you don't like the fact that LAGS as an acronym is also a word that means the opposite of what it is trying to accomplish...
Maybe you might prefer the acronym FAST
We asked ALEX today to come up with something for us:
How about FAST: Flexible Authority with Strategic Tethering?
This acronym captures the key elements of the LAGS concept:
Flexible Authority represents the "Local Authority" piece, emphasizing the autonomy and agility given to leaders on the ground to make decisions based on their unique context and needs.
Strategic Tethering encapsulates the "Global Strategy" aspect, conveying that while there is local flexibility, it is still connected to and guided by the overarching organizational strategy set by centralized leadership.
The word "Tethering" evokes the image of being anchored or tied to something, in this case the global strategy, while still having some slack or flexibility to move and adapt as needed.
So FAST (Flexible Authority with Strategic Tethering) maintains the core meaning of LAGS while putting a slightly different spin on the terminology. It underscores the balance between local autonomy and strategic alignment that is key to this organizational model.
What do you think? Does this resonate with your understanding of the LAGS concept? I'm happy to brainstorm further if you'd like to explore other options.
Working as a site HR Generalist at a previous company, I was encouraged to make local decisions regarding employee relations issues as described in today's post. To combat inconsistencies, our division HR leader held a monthly call with her team of ~30 where we reviewed all the prior month's decisions that we tracked in a database). The monthly meeting helped us see the bigger picture and calibrate the 'time' we assigned to the 'crime' in employee investigations and infractions.