How decentralized leadership creates resilient organizations

Highly centralized structures are inherently fragile. When things are running smoothly and predictably, highly centralized organizations and working structures may work for a while. But when control and decision making is concentrated to a single point of failure, this creates a critical vulnerability.

This principle applies across all types of networks: people, technology and organizational processes. Highly centralized structures concentrate decision-making and problem-solving ability within an individual role or small team, or may even delegate decision making to a single computer algorithm or piece of software. Decentralized structures assign more authority, decision-making capability and autonomy to individuals and teams. When something goes wrong, each team and individual has more discretion to solve the problem using their own skills and approach.

Decentralization cannot happen instantly though; it’s no good decentralizing blame when something goes wrong in a system that has been highly centralized. Encouraging autonomy across entire organizations, departments and teams takes deliberate effort within a structure that distributes responsibility and capability. In the context of people management, this must take the form of excellent performance management.

Decentralized leadership

Decentralized leadership involves distributing power, authority, control and decision making across people or networks. This concept is not new. It has long been recognized as a key characteristic of effective leadership, particularly in adapting to high-pressure and high-stakes environments that require adaptability.

In a prize-winning essay on military leadership in 1889, Captain AM Murray emphasized the need for decentralized military leadership: “The altered conditions of modern battles more than ever demand the decentralization of responsible leadership.” The argument was that highly centralized, authoritarian leadership prevents people from making quick and responsive decisions that are necessary for preventing catastrophes or seizing opportunities.

Decentralization emerged again as a key characteristic of digital systems and networks in the mid-20th century. The internet was originally designed to be a highly resilient worldwide system of sharing essential information. The network was decentralized to ensure it would survive anything the Cold War era could throw at it: a single point of failure or vulnerability would be a target of attacks.

Ironically, much of the internet is now highly centralized. More than half of the internet’s traffic flows through the servers of six companies (Microsoft, Netflix, Google, Amazon, Meta and Apple). So many systems are both interconnected and highly dependent on centralized services, seemingly minor issues can disable an entire organization’s ability to function.

It’s now necessary to understand how the leadership structures of our organizations align (or clash) with the structure of digital networks, because managing people is becoming more enmeshed with, and inseparable from, technology – whether it’s on communication networks, performance management systems or HR software. Are there key systems or people without which your organization would be unable to function?

Decentralization in people management

In any organization, decentralization is as much about the process as the end goal. It involves enhancing people’s skills, autonomy, confidence and capacity for innovation within their roles. Individuals need to be recognized and appreciated for their independent contributions to team and collaborative goals, rather than being rewarded for conformity. Effective decentralization empowers both people managers and individuals to take decisions – both to solve problems and seize opportunities, even when there is a risk of failure.

Decentralization is not a lack of structure, it is a clear and flexible structure that accounts for the wide range of skills, capabilities and approaches that make an organization more resilient. The core assumption is everyone has different strengths and needs different support at different times. Yet there still needs to be clear strategic leadership along with clearly defined accountability, which differs from centralized control.

Exception performance management frameworks are also essential. Performance management should be consistent enough to be applicable across the organization, yet flexible enough to allow for customization in performance measures. Individuals and teams should be able to define some of their own performance metrics, and specify exactly how their chosen metrics contribute to the organization’s purpose. This ensures that while the overarching goals are consistent, the specific ways to achieve them can be adapted to fit the capability of teams and the independent contributors within them.

Limits

Decentralization always requires a striking balance. No employee exists outside of the wider organization’s purpose no matter how independently they work. It is growing challenging for people managers to understand how to manage people and technology in a way that enhances people’s skills without creating overreliance on digital tools. Focus on good human performance first and find digital tools that support people. Common standards, software and approaches to using digital tools need to be shared and effectively communicated across the organization.

Moreover, certain centralized points of authority are unavoidable because of regulatory rules and local laws that must be adhered to. Employees need the authority to effectively perform their roles while being equipped with the knowledge and understanding of essential regulations and requirements.

Decentralizing failure

Boosting autonomy and opportunities to learn across the organization creates more resilient people and networks. Everyone should be given the space to make mistakes and the support to learn from them. When people learn how to tackle problems independently and with their team, they gain valuable experience that is essential for tackling bigger problems in the future. The more this autonomy and independent problem solving can be encouraged when things are running smoothly, the better prepared they will be to handle crises when they arise.

Ian MacRae is director of High Potential Psychology and author of High Potential, Dark Social and Web of Value