4 Reasons Decentralized Business Management Is Booming
A quiet revolution is taking place in the workplace right now. Here's why centralized, hierarchal corporate structures are out.
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The nature of the workplace is changing thanks to evolving societal attitudes. While remote work is hogging the headlines, another revolution is taking place in workplaces: Centralization is out, and decentralized management is in, reflecting wider technological trends. Cryptocurrencies, Decentralized Autonomous Organizations (DAOs) and Web3 emphasize the benefits of a lack of centralized authority. Given the technological bent every organization has these days, it makes sense to adopt these principles in workplace management as well.
Here's how companies are using decentralized management to future-proof their businesses and increase employee satisfaction.
One of the common problems executives face is a lack of flexibility in their organizations during crunch time. Typically, crises blow up to critical levels before they come to the executives' attention, at which point they must personally intervene. Ideally, crises should be nipped in the bud, and lower-level employees must deal with them proactively.
A centralized organization places an enormous amount of power in the hands of a few. The organization is structured vertically, leading to lengthy decision-making chains where every decision is second-guessed. In contrast, a decentralized organization prioritizes the opinions of people closest to stakeholders and subject matter experts. This results in a flat or horizontal organization that is nimble and addresses issues quickly.
Harvard Business Review notes that decentralized organizations work best when responsiveness is the top priority. An organization structured in this fashion also frees up executives' time to carry out more value-added work instead of chasing fires all the time. Another benefit is that lower-level employees are empowered to think about the organization's future instead of worrying about what their manager will think. The result is a flexible organization that is future-proofed.
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Promotes leadership skills
Organizations face employee churn all the time, whether due to a lack of challenging work or dissatisfaction with the company's overall direction. Both of these reasons are interconnected. An inflexible organizational hierarchy leaves employees fighting to impress their managers instead of creating revenue-generating assets.
With power consolidated in the hands of a few, leadership skills are scarce. Thus, when top-level executives move on, the company faces a tough time replacing those who departed and must engage resources to locate and vet suitable leadership.
Promoting from within is ideal because long-term employees understand the company and its products well. They've witnessed the company's processes from the ground up, which makes them ideal leaders. However, centralized organizations don't provide low-level employees with the opportunity to ascend to leadership roles.
A decentralized organization forces employees to act as leaders. Thanks to greater autonomy and priority on responsiveness, employees must act decisively. Intrapreneurship increases, promoting creativity, and the organization is energized.
Empowered employees will automatically put forth ideas to make the company's products more robust. The result is an upgrade in company-wide leadership skills and a better competitive posture.
Scaling a business is a tough task. Typically, a centralized organization has to design new hierarchies and determine the degree of additional responsibility existing executives will bear. All of this results in a slow-moving expansion that often stops before it begins. In contrast, a decentralized organization can respond to changing business conditions quickly and scale accordingly. Thanks to every team and employee functioning as a separate cell, the organization can realize economies of scale and be nimble at the same time.
For instance, when expanding into a new market, a fully empowered team can research local norms and inform the broader organization of the steps it is taking to launch the company's products in that market. Thanks to the absence of lengthy approval times, the team can move quickly and establish a presence.
Thus, an organization resembles a collection of well-funded startups or early-stage companies, with each team bringing its special brand of creativity and expertise to the broader community. Furthermore, the expanding teams can customize the company's products faster, resulting in more sales and better connections with consumers.
While decentralization emphasizes individual empowerment, executive teams also have an important role to play. In fact, executives steer the larger decentralized ship and do their best to empower their employees. Decentralization emphasizes lean management. The result is an executive team that is focused on maintaining conditions that allow lower-level employees to fully express their creativity. Lean management of this sort is not focused on establishing authority or micromanagement.
Determining metrics and other performance indicators is also simple in this structure since executives aren't involved in every single low-level decision that has to be made. Instead, they can focus on the big picture and ensure the organization's goals are being met. The result is a happier executive team that performs a massive amount of value-added work. The flexibility inherent in the organization also allows employees to choose the work they're most passionate about instead of following a default executive career path. Thus, people who are truly passionate about becoming executives and performing the tasks inherent to these roles occupy the positions.
Related: 4 Ways Focusing on Your Employees Will Change Your Business
Decentralization is much more than a buzzword these days. It's the best way for organizations to structure themselves in 2022 and beyond. Given the rapid change of pace in the business world, decentralization is the best way to future-proof an organization.