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To decentralize or not to decentralise: Is that the question?

Edward M. Carroll, Organizational Design and Development in International Organizations

The extent to which a UN Agency should centralize or decentralize is one of the most vexing questions in Organizational Design today. Typically UN leaders and staff view it as an ‘either/or’ choice: Should we group an activity together, or should we push it out to the regions and country offices? In truth, it is not a simple binary answer and the arguements for both sides are persuasive to say the least.

The benefits of centralization are well known. Common business processes help drive efficiency and consistency, grouping like-minded staff and resources together creates cost-saving scale, which also enables the Agency to build deep expertise and knowledge in niche fields that can leveraged by the rest of the organisation.

The arguments for decentralization are just as persuasive. With increasing pressure to support local decision-making in development, and similar pressure mounting on the need for more responsive humanitarian action, the decentralised approach seeks to empower managers by giving them greater control over decisions and resources. By bringing authority and decision rights closer to the beneficiary, the proponents of decentralization seek to strengthen the organization’s delivery speed, its creativity and its ability to identify and scale innovation. Decentralisation is an easy sell to the donors as well. At a quick glance, who wouldn’t support putting seemingly bloated HQ organizations on a diet and beefing up the capacity to deliver in the field?

However, it would be wise for UN leaders to ensure that the centralization-decentralisation debate does not become a religious one. Many people within the Agency will have very strong feelings and opinions on the matter, since the issue strikes at the very heart of where power, status, and prestige lay within the organization. The conservative priests of centralised decision-making will emphase efficiency, managing risk, fairness, and consistancy, while their progressive counterparts will give sermons on empowerment, freedom, speed and innovation.*

The real question is how do we build a reasoned system that achieves an optimal balance between the two?

In reality, each perspective cannot live without the other. They exist as two sides of the same coin. The art of Organizational Design is therefore to create a reasoned system that balances both the creative tension and the value generated by these two approaches. The questions should be less about a choice between the two and more about what are the possible ways of organizing that could achieve an optimal “Goldilocks Design” where the Agency is neither too centralized or too decentralized, but instead primed for performance? Unfortunately there is no clear answer or template that can be neatly applied to every UN organization.

How do UN Leaders arrive at an optimal “Goldilocks Zone” where the Agency is neither too centralised or too decentralised, but instead primed for performance?

To begin the journey of Organizational Design and arriving at a decision on where to place the needle betweek the two poles, UN leaders should draw upon the lessons learned from Contingency Theory. A management theory that suggests organizational design should be contingent upon its operating environment and the types of work it is engaged in to fulfil the needs of its environment.

In practical terms UN leaders should design their organization to first and foremostly serve the beneficiaries who fall within their mandate – think ‘customer-centered design’ – before tweeking and balancing the design with internal needs. In doing so leaders should consider four aspects of their organisation:

  1. Develop a keen understanding of the Agency’s portfolio of work and the level of diversity (the mix of products and services) within it;
  2. Understand the business models within the units that make up the Agency;
  3. Evaluate the value that the Headquarters entity (aka the ‘corporate center’) can create in light of the diversity within the global portfolio;
  4. Define how the three core functions of the HQ, (a) business performance improvement, (b) shared services, and (c) compliance, can ensure the planned level of decentralization is successful and sustainable.

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