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Leadership & Business Wisdom

Simulated Decentralization

The main rule is to look simulated decentralization as a last resort only.

Whenever a unit can be set up as a business, no design principle can match federal decentralization. We have learned, however, that a great many large companies cannot be divided into genuine businesses. Yet they have clearly outgrown the limits of size and complexity of the functional or of the team structure. These are the companies that are increasingly turning to “simulated decentralization” as the answer to their organization problem. Simulated decentralization forms structural units that are not businesses but which are still up as if they were businesses, with maximum possible autonomy, with their own management, and with at least a “simulation” of profit-and-loss responsibility. They buy from and sell to each other using “transfer prices” determined internally rather than by an outside market. Or their “profits” are arrived at by internal allocation of costs to which then, often, a “standard fee,” such as 20 percent of costs, is added.

ACTION POINT: Produce internal competition by using “micro” profit-centers when feasible. Attribute revenue to each unit and match revenue with its cost.

Building Blocks of Organization

Contribution determines ranking and placement.

“What activities belong together and what activities belong apart?” A searching analysis is needed that groups of activities by the kind of contribution they make. There are four major groups of activities, if distinguished by their contribution. First, result-producing activities – that is, activities that produce measurable results that can be related, directly or indirectly, to the results and performance of the entire enterprise. Second, support activities that, while needed and even essential, do not by them-selves produce results but have results only thorough the use made of their “output” by other components within the business. Third, activities those have no direct or indirect relationship to the results of the business, activities that are truly ancillary. They are hygiene and housekeeping activities. Finally, is the top-management activity. Among the result-producing activities, there are some that directly bring in revenues (or in service institutions, directly produce “patient care” or “learning”). Here belong innovating activities, selling and all the work needed to do a systematic and organized selling job. Here also belongs the treasury function, that is, the supply and management of money in the business.

Key activities should never be subordinated to nonkey activities. Revenue-producing activities should never be subordinated to nonrevenue-producing activities. And support activities should never be mixed with revenue-producing and result-contributory activities.

ACTION POINT: Give result-producing activities high visibility in your organization. Make sure support activities are subordinated to result-producing activities. Consider delegating employee welfare activities to employee teams.

“What she really loved was to hang over the edge and watch the bow of the ship slice through the waves. She loved it especially when the waves were high and the ship rose and fell, or when it was snowing and the flakes stung her face.”

Kristin Cashore

“And a special thanks for not burning up the whole ship. Including yourself, you daft bum-rag.”

Scott Westerfeld

“She watched the gap between ship and shore grow to a huge gulf. Perhaps this was a little like dying, the departed no longer visible to the others, yet both still existed, only in different worlds.”

Susan Wiggs

“There’s always a siren, singing you to shipwreck. Some of us may be more susceptible than others are, but there’s always a siren. It may be with us all our lives, or it may be many years or decades before we find it or it finds us. But when it does find us, if we’re lucky we’re Odysseus tied up to the ship’s mast, hearing the song with perfect clarity, but ferried to safety by a crew whose ears have been plugged with beeswax. If we’re not at all lucky, we’re another sort of sailor stepping off the deck to drown in the sea.”

Caitlín R. Kiernan

“A whale ship was my Yale College and my Harvard.”

Herman Melville

“She found out that having something to do prevented you from feeling seasick, and that even a job like scrubbing a deck could be satisfying, if it was done in a seamanlike way. She was very taken with this notion, and later on she folded the blankets on her bunk in a seamanlike way, and put her possessions in the closet in a seamanlike way, and used ‘stow’ instead of ‘tidy’ for the process of doing so. After two days at sea, Lyra decided that this was the life for her.”

Philip Pullman

“Hold still,” my father would say, while I held the ship in the bottle and he burned away the strings he’d raised the mast with and set the clipper ship free on its blue putty sea. And I would wait for him, recognizing the tension of that moment when the world in the bottle depended, solely, on me.”

Alice Sebold

“Penny: I feel just like Mother Teresa. Except for the virgin part. That ship sailed a long time ago.”

Kaley Cuoco

“Friendship is the best kind of ship.”

Jennifer Lane

“In the empty immensity of earth, sky, and water, there she was, incomprehensible, firing into a continent.”

Joseph Conrad

“If I don’t see the reason of someone being my friend, chances are, we are just floating and I need a ship to set sail.”

Michael Bassey Johnson

“Mr. Bird flung his food away and leaped to his feet, glaring around at no one in particular. ‘I am not a dog!’ he shouted agrily, his gold earrings flashing in the firelight.”

Tim Powers

“Inevitably, though, there will always be a significant part of the past which can neither be burnt nor banished to the soothing limbo of forgetfulness— myself. I was and still am that same ship which carried me to the new shore, the same vessel containing all the memories and dreams of the child in the brick house with the toy tea set. I am the shore I left behind as well as the home I return to every evening. The voyage cannot proceed without me.”

Luisa A. Igloria

“Shandy looked ahead. Blackbeard, apparently willing to get the explanation later, had picked up his oars and was rowing again.

‘May I presume to suggest,’ yelled Shandy giddily to Davies, ‘that we proceed the hell out of here with all due haste.’

Davies pushed a stray lock of hair back from his forehead and sat down on the rower’s thwart. ‘My dear fellow consider it done.”

Tim Powers

“I do not like to sound discontented neither,’ said Pullings, ‘nor to crab any ship I belong to; but between you and me, Doctor, between you and me, she is more what we call a floating coffin than a ship.”

Patrick O’Brian

“La memoria es como libro en el cual se escribe toda nuestra vida. Algunas veces deseamos cerrarlo y olvidarlo para no recordar todos los escabrosos detalles, y otras veces deseamos abrirlo y observarlo detenidamente, queriendo volver a sentir lo mismo que sentimos en aquel momento.”

Audrey Dry

“Y, entonces, en ese instante que tan solo dura un segundo, el cerebro se encarga de abrir la cerradura del cofre en el cual guardas todo lo que aprecias. Cede de tal manera que la tapa se abre y todo lo que hay en el interior sale de forma tan rápida y tan fugaz que no puedes detenerlo.”

Audrey Dry

“Scoprì immediatamente che, se manovrava le vele nel modo giusto, l’Albatro tagliava le onde come un coltello bene arrotato. Le corde scricchiolavano piacevolmente e la prora affilata sembrava sibilare, mentre puntava dritta a nord.”

David Eddings

“Then, all of a sudden, there was a great black hull, stretching farther than my eye could see.”

Ellen Emerson White

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