Hacking HR to Build an Adaptability Advantage

gary-hamel's picture

Centralized decision-making

By Gary Hamel on May 8, 2022

In most organizations, senior executives dominate planning and resource allocation processes and therefore have disproportionate share of influence over key decisions.  Problem is, when you concentrate the responsibility for setting strategy and direction at the top of the company, you give a small group of long-serving leaders the right to veto change—and they often will, since most of their emotional equity is invested in the past.   Nostalgic CEOs will often resist the need to revisit decisions they made years earlier, or will cling to a beloved business model long after it’s lost its competitive vitality.

Empirically, we know that deep change is usually precipitated by a crisis, or a long period of under-performance, and that it usually takes a change in leadership (aka “regime change”) to set a company on a new course.  In other words, strategic realignments are infrequent, belated and convulsive—just as they are in totalitarian states, and for the same reason:  too much power vested in the “party of the past.”

In a world of accelerating change, we can no longer tolerate top-down organizational models in which the gating factor on the pace of change is the willingness of a few senior executives to write off their own depreciating intellectual capital.


You need to register in order to submit a comment.

val-green's picture

I am inclined to agree with Hendrik. It is difficult to reach any kind of decision with too big a team, so there is a perceived need for the top management structure to be small and tightly knit ... but unless this small team focuses firmly on the future, sets clear business goals and values and then gives a clear mandate to others to get on and deliver it, things will quickly silt up. Once that pattern is set, however, there is again something of a vaccuum. Either the direction keeps changing because the top team love setting direction, or it is such a painful process they want to stick with the one they have even when it is no longer relevant or not working. I guess the worst thing is having set the direction the top team then sets about micro-managing its day-to-day implementation. I can't help feeling a hierarchical structure is a necessary evil though, particularly in larger organisations.

greg-stevenson's picture

On the road to transitioning from centralised to decentralised leadership an increasingly powerful feedback loop from within is required to de-incentivise the veto on unfounded grounds.

hendrik-dejonckheere_1's picture

Centralized decision making results for a large part from the lac of good policy making. If leadership has no clue how to address the future they can't invite the organization members to take the freedom within the policy guidelines. The alternative and easy way out is to demand initiative from the organization and hold a firm grip with centralized decision making. Frustration, territory building and loosing out in the market is the logical consequence.

The first issue is whether or not we are likely to see a different allocation or concentration of power. I suspect we will, in the next generation of leadership but for the next 10-15 years, I'd gamble there will be little wide scale change.

So, if this is the case I think fundamentally we need to ask - how do you make approaching the future more attractive than maintaining the past?

For me this blends with what Clay Christensen says, "unfortunately, data is only available about the past." He builds on this to discuss the consequential need to have good theories as working models of causality for thinking about the future. (I hope this is a fair summary)

It leaves me wondering, what (near) data or experience and/or good theories might help to put emotional equity in perspective (thus enabling change)?

E.g., self-awareness inspiring litmus tests like Gary Klein's "pre-mortem", certain kinds of organizational observations from internal or external stakeholders, signals from adjacent markets, etc. ?

Or is it even realistic to seek to topple emotional equity with logic? How then can we help generate emotional equity in the future?

Perhaps a Whirlpool style seeding/gating of innovation helps to create attachments to new ideas.
Or is there a way to leverage principles of gamification to entice investment from the past to the future?
Or do you revisit compensation or the definition of value?
Or leverage social norms from peer group of executives to model future oriented behaviours?

Perhaps if we are able to articulate the sub components of what is psychologically powerful about being a member of the "party of the past", there is a way to find alternative routes (i.e., other than trauma) to inspire change?

Immensely fun to think about - thank you Gary :)

tojo-eapen's picture

Really interesting topic...

It might sound a bit paradoxical but by the nature of their roles, lot of power and responsibility (depending on the balance the leader chooses to communicate), including decision making responsibility seems to be vested in the leadership roles. Having worked in few different cross cultural settings, some of the fundamental country cultural elements seem to kick in terms of how things happen.

To create any shift in current approaches, I see three key aspects.

1. Individual Leadership Principles/Behaviors
How open is the leader to
- diverse perspectives
- willing to being openly challenged
- listen to multiple perspectives by proactively engaging (not just the positive views in the small circle)
- delegate right levels of trust and responsibility to the respective teams with an initial higher tolerance for mistakes as things shift
- not come across as emotionally stuck to his or her point of view
- and reassure/encourage the organization by creating a culture of open dialogue?

Having the right leaders in the right roles can have a big impact. In today's world, any change also requires patience and a healthy tolerance for experimentation and failure. It is a noticeable trend that due to lack of patience and persistence, lot of the difficult change efforts are rescinded.

2. Organizational Culture
- Ways of Working on a day to day basis
- Values
- Behaviors across the organization - Is open dialogue encouraged, appreciated and rewarded? How are the right people involved and their inputs heard without compromising the speed?

3. Structure
- What mode of operation does the structure of the organization and roles lead to? What sort of hierarchy does the structure communicate and resulting ways of working including decision making process?

Another key aspect to look at from an organizational context is the speed of decision making. One challenge that organizations have is when leaders are willing to have others involved in the decision making process but then the process itself gets delayed due to some issues:
a) the leader needing to get involved in the final decision
b) multiple sign-offs/bottlenecks at different levels needed, committee based decisions
c) lack of clarity and then trust in the approach and stakeholders, without getting too rigid (which itself requires trust)

Thank you!