To Centralize or Decentralize?

There are many ways to centralize operations: physically and/or digitally.

Decentralization

Decentralizing operations is not just about governance - it is about people, technology, infrastructure, assets, structure, costs, risks, business continuity and most importantly decision-making.

While decentralizing operations brings efficiency in implementation and agility in decision-making at the micro-level, it can complicate if the operations are spread too thin. Also, monitoring of wide-spread operations, management of systems, and training of distributed workforce become huge challenges.

Balancing decentralized operations need to focus on the following:

• Monitoring and aggregating through technology so that a real-time view and handling process is well established

• Timely cascading and implementing the instructions and processes from the central command onto the decentralized centers

• Relaying back the critical bottlenecks of the decentralized locations to the leaders at the center

• Manage risks which are not common or known to the center or the other decentralized locations

• Containing costs, especially the repeatable ones, so that bottom lines are not thinned

• Managing the right balance of the center and the centers

Centralization

Centralizing operations is not just about aggregating resources - it is about managing diversity at one place, scalability from the same location, building redundancies from other locations, and protecting the centralization.

While centralizing operations brings complete control over the entire operations it can reduce the speed of implementation and agility in decision-making at the macro-level and micro-levels.

Balancing centralized operations need to focus on the following:

• Expectation of being self-sustainable as there is no space for dependency

• Manage the momentum built by size at a single location

• Loss of strategic vision over multiple factors developed due to a myopic vision

• Manage the risks due to the centralization, like geo-political and nature's risks

• Manage costs due to the need of a big central location with large number of resources

  
  

What to do - centralize or decentralize?

The decision between centralization and level of decentralization can be taken while keeping an eye on the following parameters:

• Regulatory compliance making a particular option mandatory

• Cost management is priority, and budgets are available for making either a choice

• Data and technology security is critical and can/cannot be managed across multiple locations

• Availability of resources and support for both centralization and decentralization

• Leadership availability for decentralized operations

• Ability to centralize/decentralize certain functions or processes

• Whether decentralization spreads over domestic or international regions

Some of the different models, which integrate both are:

• Centralized Core and Decentralized/Localized Innovation

• Centralized Strategy and Decentralized/Localized Operations

• Centralized Standards and Decentralized/Localized Decision-Making

• Centralized Decision-Making and Decentralized/Localized Execution, and many others.

Whether you would like to centralize or decentralize your operations, Stream can help you with its Advisory services, as to which is a more suitable option and also help you develop the structure and deploy the processes and systems.