Business management

4 Reasons Decentralized Business Management Is Booming

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The nature of the workplace is changing through changing societal attitudes. As remote work grabs the headlines, another revolution is happening in the workplace: centralization is over and decentralized management is in place, reflecting broader technology trends. Cryptocurrencies, Decentralized Autonomous Organizations (DAOs), and Web3 highlight the benefits of a lack of centralized authority. Given the technological bent of every organization these days, it makes sense to embrace these principles in workplace management as well.

Here’s how companies are using decentralized management to future-proof their business and increase employee satisfaction.

Self-sufficiency

One of the common problems leaders face is their organization’s lack of flexibility in times of crisis. Typically, crises explode to critical levels before they come to the attention of leaders, in which case they must intervene personally. Ideally, crises should be nipped in the bud and lower-level employees should proactively manage them.

A centralized organization places an enormous amount of power in the hands of a few. The organization is structured vertically, which leads to long decision chains where every decision is questioned. In contrast, a decentralized organization prioritizes the opinions of those closest to the stakeholders and subject matter experts. This results in a flat or horizontal organization that is agile and solves problems quickly.

harvard business review notes that decentralized organizations work best when responsiveness is the top priority. An organization structured this way also frees up time for executives to do more value-added work instead of chasing fires all the time. Another benefit is that lower-level employees are empowered to think about the future of the organization instead of worrying about what their manager will think. The result is a flexible and scalable organization.

Related: How to Simplify and Streamline Your Business in 2022

Promotes leadership skills

Organizations constantly struggle with employee turnover, whether due to a lack of challenging work or dissatisfaction with the overall direction of the company. These two reasons are linked. An inflexible organizational hierarchy forces employees to fight to impress their managers instead of creating income-generating assets.

With power consolidated in the hands of a few, leadership skills are rare. Thus, when senior managers leave, the company faces a difficult time to replace those who have left and must commit resources to locate and select appropriate leadership.

Promoting from within is ideal because long-time employees are familiar with the company and its products. They have witnessed company processes from the ground up, which makes them ideal leaders. However, centralized organizations do not offer low-level employees the opportunity to advance to leadership positions.

A decentralized organization forces employees to act as leaders. Thanks to greater autonomy and a priority on responsiveness, employees must act with determination. Intrapreneurship increases, fostering creativity, and the organization is energized.

Empowered employees will automatically come up with ideas to make company products more robust. The result is improved company-wide leadership skills and a better competitive position.

Easier scaling

Scaling a business is a difficult task. Typically, a centralized organization must design new hierarchies and determine how much additional responsibility existing executives will take on. All of this results in slow expansion that often stops before it begins. In contrast, a decentralized organization can react quickly to changing business conditions and evolve accordingly. With each team and employee operating as a separate cell, the organization can achieve economies of scale and be agile at the same time.

For example, when expanding into a new market, a fully empowered team can research local standards and inform the wider organization of the steps it is taking to launch the company’s products in that market. With no lengthy approval times, the team can act quickly and establish a presence.

Thus, an organization resembles a collection of well-funded startups or start-up companies, with each team contributing its particular brand of creativity and expertise to the community at large. Plus, expanding teams can personalize company products faster, which translates to more sales and better consumer relationships.

Effective management

While decentralization emphasizes individual empowerment, management teams also have an important role to play. In fact, leaders steer the largest decentralized ship and do their best to empower their employees. Decentralization emphasizes lean management. The result is a leadership team that is focused on maintaining conditions that allow lower-level employees to fully express their creativity. Lean management of this type does not focus on establishing authority or micromanaging.

Determining metrics and other performance indicators is also straightforward in this structure since executives are not involved in every low-level decision that needs to be made. Instead, they can focus on the big picture and making sure the organization’s goals are met. The result is a happier management team that does an enormous amount of value-added work. The inherent flexibility of the organization also allows employees to choose the work they are most passionate about instead of following a default executive career path. So, people who are genuinely passionate about becoming executives and accomplishing the tasks inherent in those roles fill the positions.

Related: 4 Ways Focusing on Your Employees Will Change Your Business

Decentralization is much more than a buzzword these days. This is 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.