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Features

Published December 2007

Centralization Versus Decentralization: A Closer Look at How to Blend Both

  Shelly Heiden

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Today, perhaps more than ever, organizations of all sizes and across all industries face significant pressures as they grow their businesses in a competitive and increasingly global economy. These organizations are constantly reorganizing and restructuring in response to economic conditions, global expansion, an onslaught of new technologies and other factors beyond their control.

Fortunately, recent advances in technology and the ubiquity of Internet access are eliminating geography and time-zone barriers, which have historically limited an organization’s ability to conduct business anytime and anywhere. As a result, however, employees are becoming more distributed, and organizations are becoming more decentralized.

The trend toward decentralization, whether geographically dispersed or split among business units or divisions, has fueled the debate over centralization versus decentralization, with organizations feeling forced to support corporate goals at the expense of accommodating local requirements. As organizations weigh both approaches, they are increasingly asking:

• Are employees and the organization as a whole best served by maintaining a centralized IT infrastructure that supports a decentralized workforce?
• Should certain applications, specifically those that are geography or business-unit specific, be decentralized?
• How can I accommodate local efforts and requirements while supporting the organization’s corporate goals?
• Are centralized and decentralized approaches mutually exclusive?

While there are compelling pros and cons on both sides, the reality is that most global organizations are embracing both centralized and decentralized philosophies and are incorporating elements of both in their approaches to HR and talent management. Because HR data feeds into and is leveraged across applications that span the entire organization, regardless of business unit
or geography, most organizations find it most effective to centralize HR data and associated talent management applications — including learning management, career development, performance management, succession planning and compensation management — while allowing for localization of learning content.

While decentralization — both in terms of management structure and physical employee distribution — is gaining in popularity and adoption, especially across global organizations, it also can lead to unique talent management challenges. Already strained HR professionals must ensure that employees have access to proper training, adhere to appropriate
regulations and receive the necessary feedback and guidance to help them advance their professional careers, regardless of their physical location or time zone.

As employees gain autonomy under a decentralized structure, companies must continually roll out centralized solutions that ensure corporate compliance and consistency. Because managers within distributed organizations often make decisions that could impact the overall business, the solution must provide the ability to train and regularly update employees on corporate vision and philosophies so that employee decision making supports these ideals and objectives.

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