Today’s organizations need to move faster than ever before. Covid-19 exposed which companies in an industry could change direction quickly and respond to new consumer, employee, regulatory, and supply demands, turning adversity into opportunity. “Agility” is the management word of the decade for sure. But to move with agility in a complex organization requires leaders to be confident that important decisions are being made at the right level and location across the enterprise.
HR leaders are often asked: Where should work be managed in the organization? What decision rights should each role have? How do we promote consistency, while recognizing local differences? How do we simplify the organization and empower our teams on the ground, while building global platforms and brands?
Unfortunately, the decisions are often made using an overly simplistic choice of centralized or decentralized. Work and decisions often become centralized at a corporate level for a variety of good reasons – to drive common strategy and policy, to consolidate work for efficiency and scale, to leverage scarce talent through centers of expertise. But when the wrong work is pulled out of the business it often becomes disconnected from the needs of customers in the drive for consistency. Programs and staff grow. Efficiencies are lost in the cost of overhead. Shadow functions pop up in the markets and business units when leaders become frustrated with bureaucratic colleagues at the center.
After some time, executives launch a corporate center transformation project and work is devolved back into the business in the name of speed and accountability. As consultants we see this pendulum swing all too often.
As we work with complex organizations to find the right balance, we find the concept of “center-led” to be useful. It creates a way to get the strategic guidance, orchestration, and investment that only the enterprise layer can provide while empowering local teams to make good, fast decisions that are right for their market but in alignment with the whole. And we believe that the HR practitioner has an important role in leading this work.
What is “center-led”
Global businesses that are trying to drive scale and agility through integration across markets must share a common design logic that enables consistent connection points that add value. The “center-led” concept provides that logic. It gets us out of the centralized/decentralized debate and helps answer a more nuanced question: “Where will strong connections drive value and where should we lighten linkages because they create unrewarded complexity?”
Below is the Center-Led Framework. The vertical axis denotes the degree of integration of ways of working needed. The horizontal axis denotes the level of control in decision-making required. Each quadrant is described below the graphic.
Centralized: Some work and decisions need to be placed at the enterprise level, often when the strategy requires policies or controls to enhance risk management and protect the brand. Highly regulated industries typically have more centralized oversight functions. But every function has some work that needs to mandated, such as what financial reporting system will we use, what IT infrastructure will run our networks, what ethics and values will guide our behaviors. It is a small, but powerful set of drivers that should be centralized.
Decentralized: In any system, there is some work where driving common process and standards in the name of scale and efficiency actually adds little value. Translating content into local languages or adhering to local regulations are some classic examples. Decentralized work means that leaders are free to make decisions without escalating to a center and can freely define their own processes and ways of working. It makes the most sense where speed creates value and variation poses little risk to performance outcomes and strategic objectives.
Center-Led: The idea of center-led is “freedom in a framework.” Global standards are set, but execution within those parameters is determined locally. A common strategy is created by representatives of the network and is broadly communicated. The decision-making process is clear, and a rhythm of conversations is set to ensure voices are heard from across the system. The center orchestrates, coordinates, provides resources, and facilitates alignment and connection. The network is connected through lateral integrators such as communities of practice, shared metrics, or formal integrator roles.
High-control, low integration: This is a “red-flag” area. Symptoms are escalation of decisions up the hierarchy without valuable insights added. A typical example is spending approval where the approver rarely says no because they have no useful criteria to make trade-offs.
Center-led is not just a structure or reporting system. It typically is a set of roles at the center and dedicated or aligned roles in the operating units. The most important part of the constructor, however, are the processes, forums, and metrics that drive alignment and clear guardrails.
We worked with a large oil and gas company with operations spread across North America. The project focused on redefining how a number of core activities were performed to both optimize production and improve depth and quality of analytics. The project team had been wrestling with the question of what work should be left for the operating units to manage versus where a more centralized approach would add value. Without a framework and set of criteria, the discussions had deadlocked. Those on the team that were based in the field worried about solutions that they couldn’t afford or would be “one size fits none.” Those that came from other corporate functions felt their colleagues were just trying to hang onto power.
The first step taken with the client was to define guiding principles for their business operations to help define a design logic. Some examples that they used to determine what work should be centralized, decentralized, or center-led included:
- Impact on cycle-time
- Production performance
- Level of knowledge of local assets required to make optimal decisions
Next, leaders were brought in for a co-creative session in which the end-to-end activities were explored and assessed against the design logic. Quick wins were identified for where existing bureaucracy was slowing down work as well as where outcomes were currently suboptimized because common standards and ways of working weren’t being used. The focus was always on the customer and business strategy, but also creating better and more satisfying ways of work for employees.
Once there was a clear vision of where work would sit, ownership of outcomes was redefined through clear accountability and decision rights and a center of excellence was set up to drive standards through cross-asset visibility. Technical leaders were put in place as resources to deal with key challenges that arose and drive a common vision. Work and management processes were redesigned to account for the new ways of working, and metrics were realigned to make alignment and coordination rational.
A holistic system was designed around the work and the new organization capabilities that needed to be created. This got the team out of an unproductive centralization/decentralization debate and focused on the design of an enterprise-field network.
Three Ways that the HR Professional can Assist
Designing a center-led capability may seem like a challenging and complex process to facilitate. Here are three ways to guide business leaders.
Identify and define guiding principles
Many business leaders want to dive into reshuffling work without first aligning on the challenge to solve for and the design criteria that will set up the business for success. HR leaders can take an active role in helping the business step back and identify the underpinning principles which will help shape the future ways of working. This can be accomplished through interviews with leaders or leading an interactive workshop. Typically, we utilize both methods in which interviews are first conducted to gain a clear “working draft.” Then a broader group is brought together to iterate and further refine.
Challenge the business on assumptions about control
Use your role as a business partner to challenge the status quo and assumptions about how work must be done and bring to light unproductive power dynamics and patterns. As the group maps work against the center-led framework, challenge them to identify where they can empower employees and colleagues more. Help them see where senior leaders need to spend more time together setting clear direction and boundaries. And where they need to let go of decisions to create speed but also to develop talent. Bring data from the current state assessment to identify changes that will not only drive enhanced business outcomes but may also solve for adjacent culture and talent management issues.
Support value capture and follow-up
HR leaders are in a pivotal position to activate new ways of working and ensure the new system operates as intended. Following the initial design work, it is important to translate accountabilities into clearly defined, unique, value-adding roles. Additionally, the talent profile for people in center-led roles is critical. Leaders put into these positions must have high credibility within the organization, but also be comfortable leading through influence rather than hands-on control. HR leaders can also coach individuals and teams in the new collaborative behaviors and conduct pulse checks to monitor progress. As the model is activated HR can bring the data and insights needed to course-correct or refine the design as needed.
The quest for agility and scale will only increase as companies continue to face changing customer expectations, new ways of teaming and working, and evolving technology and sustainability requirements. We believe the center-led framework is a powerful tool to ensure decisions are made in the right place to drive integration and value, while enabling speed and empowerment. And HR leaders are uniquely positioned to lead this work.
Keri Macaluso and Amy Kates are with Kates Kesler, a leading organization design firm that is a part of Accenture. For more on this topic please see our most recent book, Networked, Scaled, and Agile (Kates, Kesler, DiMartino, 2021) and our website, KatesKesler.com