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The Federal Principle

Federalism relieves top management from operating duties and sets it free to devote itself to its proper functions.

What the enterprise needs is a principle that gives both the center and the parts genuine managerial functions and powers. This principle is federalism, in which the whole of the enterprise is conceived as made up of autonomous units. The federal enterprise and all its units are in the same business. The same economic factors determine the future of the whole as well as of all units; the same basic decisions have to be made for all of them; the same kind and type of executive is needed. Hence the whole requires a unified management in charge of the basic functions: the decision what business the enterprise is in, the organization of the human resources, and the selection, training, and testing of future leader.

At the same time, each unit is a business by itself. It produces its own products for a distinct market. Each unit must, therefore, have wide autonomy within limits set by the general decisions of the management of the whole. Each unit has to have its own management. The local management will be primarily an operating management; it will be concerned mainly with the present and immediate future rather than with basic policy. But within a limited scope it will have also to discharge real top-management functions.

ACTION POINT: Make maximum use of the federal principle.

Federal Decentralization: Strengths

The greatest strength of the federal principle is that it alone of all known principles of organization prepares and tests people for top-management responsibility at an early stage.

In “federal decentralization” a company is organized into a number of autonomous businesses. Each unit has responsibility for its own performance, its own results, and its own contribution to the total company. Each unit has its own management which, in effect, runs its own “autonomous business.”

In a federally organized structure, each manager is close enough to business performance and business results to focus on them. The federal principal therefore enables us to divide large and complex organizations into a number of businesses that are small and simple enough that managers know what they are doing and can direct themselves toward the performance of the whole instead of becoming prisoners of their own work, effort, and skill. Because management by objectives and self-control become effective, the number of people or units under one manager is no longer limited by the span of control; it is limited only by the much wider span of managerial responsibility. The greatest strength of the federal principle is, however, with respect to manger development. This by itself makes it the principle to be used in preference to nay other.

ACTION POINT: Give people maximum responsibility by organizing according to the federal principle. Become an organization that develops numerous people.

“Money may not buy happiness, but I’d rather cry in a Jaguar than on a bus.”

Françoise Sagan

“Some beautiful paths can’t be discovered without getting lost.”

Erol Ozan


“Always focus on the front windshield and not the review mirror.”

Colin Powell

“The problem with the designated driver program, it’s not a desirable job, but if you ever get sucked into doing it, have fun with it. At the end of the night, drop them off at the wrong house.”

Jeff Foxworthy

“Yes, heaven forbid I not be protected from tanks.”

Stephenie Meyer

“Take it easy driving– the life you save may be mine.”

James Dean

“After being bombarded endlessly by road-safety propaganda it was almost a relief to find myself in an actual accident.”

J.G. Ballard

“Americans will put up with anything provided it doesn’t block traffic.”

Dan Rather

“It was like being in a car with the gas pedal slammed down to the floor and nothing to do but hold on and pretend to have some semblance of control. But control was something I’d lost a long time ago.”

Nic Sheff

“No, no, no. There’s no such thing as cheap and cheerful. It’s cheap and nasty & expensive and cheerful.”

Jeremy Clarkson

“Wait a minute. What did you just say? You’re predicting $4-a-gallon gas? … That’s interesting. I hadn’t heard that.”

George W. Bush

“If you are clinically insane, by which I mean you wake up in the morning, and you think you are an onion, this is your car, (about the BMW X3).”

Jeremy Clarkson

“The car has become an article of dress without which we feel uncertain, unclad, and incomplete in the urban compound.”

Marshall McLuhan

“Experience: the vehicle of history. Teenagers: the driving force behind fatal accidents.”


“Racing cars which have been converted for road use never really work. It’s like making a hard core adult film, and then editing it so that it can be shown in British hotels. You’d just end up with a sort of half hour close up of some bloke’s sweaty face.”

Jeremy Clarkson

“Der Deutsche fährt nicht wie andere Menschen. Er fährt, um recht zu haben.”

Kurt Tucholsky

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