Talking about Decentralization

Alfred P. Sloan of General Motors:

Our decentralized organization and our tradition of selling ideas, rather than simply giving orders, impose the need upon all levels of management to make a good case for what they propose. The manager who would like to operate on a hunch will usually find it hard to sell his ideas to others on the basis. But, in general, whatever sacrifice might be entailed in ruling out a possibly brilliant hunch is compensated for by the better-than-average results which can be expected from a policy that can be strongly defended against well-informed and sympathetic criticism.

(Surowiecki on) Jack Welch of General Electric:

Welch’s most important initiative as CEO of General Electric was his transformation of the company into what he called a “boundaryless corporation.” Harking back to the questions [about transaction costs] raised by Ronald Coase, Welch tried to make the boundaries between GE and outside markets more permeable. He broke down boundaries between GE’s different divisions, arguing that a more interdisciplinary approach to problems fostered diversity. He sharply reduced the layers of management separating the people at the top from the rest of the company. And by creating what were known as “Work-Out” sessions where managers were subjected to often stinging public criticism from those they managed, he tried to make the boundaries between bosses and subordinates less rigid. Welch hardly succeeded in all he tried, and when it came to certain decisions, like whether or not to spend tens of billions of dollars on acquisitions, he seemed to disregard opposing views in favor of his own unwavering convictions. But boundarylessness was one of the things that allowed GE, unlike most old-line American industrial corporations, to flourish.

 

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  1. […] companies are encouraging dishonesty and the hiding of information. A more decentralized, “boundaryless” corporation can combat these problems, however. ¬†Decisions about local problems should be […]



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