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Federal Decentralization: Requirements

As a minimum the unit must contribute a profit to the company rather than merely contribute to the profit of the company.

Federal decentralization has stringent requirements. Federal decentralization is applicable only where a company can truly be organized into a number of genuine “businesses.” This is its basic limitation. As a minimum the unit must contribute a profit to the company. And it must be a genuine profit determined by the objective judgment of the marketplace.

Federal decentralization will work only if the top-management job is clearly defined and thought through. Federalization, if properly applied, makes top management capable of doing its own job precisely because it does not have to worry about operations, but can concentrate on direction, strategy, objectives, and key decisions for the future. The federal principle demands great responsibility from the operating units, the autonomous businesses. They are given the maximum of autonomy; and this requires that they assume the maximum of responsibility. Federal decentralization requires centralized controls and common measurement must know what is expected of each business, what is meant by “performance,” and what developments are important. To be able to give autonomy one must have confidence. And this requires controls that make opinions unnecessary. A federal unit of a autonomy is a means toward better performance for the entire company.

ACTION POINT: Ensure that executives of your autonomous units have maximum autonomy and maximum responsibility. Implement this by establishing a system of controls that makes performance or the lack of performance very evident.

Reservation of Authority

There must be a kind of “supremacy clause” reserving to central management the decisions that affect the business as a whole and its long-range future welfare.

Top management in a decentralized company must think through carefully what decisions it reserves for itself. For there are decisions that have to do with the entire company, its integrity, and its future. These decisions can be made only by somebody who sees the whole and is responsible for the whole. Specifically, there must be three reserved areas if the business is to remain a whole rather than splinter into fragments. Top management, and to management alone, can make the decision on what technologies, markets, and products to go into, what businesses to start and what businesses to abandon, and also what the basic values, beliefs, and principles of the company are. Second, top management must reserve to itself the control of the allocation of the key resource of capital. Both the supply of capital and its investment are top-management responsibilities that cannot be turned over to the autonomous units of a federal organization.

Third, the other key resource is people. The people in a federally organized company, and especially managers and key professionals, are a resource of the entire company rather than of any one unit. The company’s policies with respect to people and decisions on key appointments in the decentralized autonomous business are top-management decisions – though of course, autonomous business managers need to take an active part in them.

ACTION POINT: Reserve action key decisions for top management, especially those having to do with the mission, values, and direction of the organization; the allocation of capital; and the selection of key people.

“I sincerely believe that banking establishments are more dangerous than standing armies, and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.”

Thomas Jefferson

“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”

Henry Ford


“Choose a leader who will invest in building bridges, not walls. Books, not weapons. Morality, not corruption. Intellectualism and wisdom, not ignorance. Stability, not fear and terror. Peace, not chaos. Love, not hate. Convergence, not segregation. Tolerance, not discrimination. Fairness, not hypocrisy. Substance, not superficiality. Character, not immaturity. Transparency, not secrecy. Justice, not lawlessness. Environmental improvement and preservation, not destruction. Truth, not lies.”

Suzy Kassem

“I believe that banking institutions are more dangerous to our liberties than standing armies.”

Thomas Jefferson

“Gringotts was the safest place in the world for something you wanted to hide — except perhaps Hogwarts.”

J.K. Rowling

“He tried to read an elementary economics text; it bored him past endurance, it was like listening to somebody interminably recounting a long and stupid dream. He could not force himself to understand how banks functioned and so forth, because all the operations of capitalism were as meaningless to him as the rites of a primitive religion, as barbaric, as elaborate, and as unnecessary. In a human sacrifice to deity there might be at least a mistaken and terrible beauty; in the rites of the moneychangers, where greed, laziness, and envy were assumed to move all men’s acts, even the terrible became banal.”

Ursula K. Le Guin

“The drug war is a total scam, prescription drugs kill 300K a year, while marijuana kills no one, but they spend billions/year ‘fighting’ it, because pot heads make for good little slaves to put into private prisons, owned by the banks who launder the drug money, and it’s ALL DOCUMENTED.”

Alex E. Jones

“When they took a young man into Tellson’s London house, they hid him somewhere till he was old. They kept him in a dark place, like a cheese, until he had the full Tellson flavour and blue-mould upon him. Then only was he permitted to be seen, spectacularly poring over large books, and casting his breeches and gaiters into the general weight of the establishment.”

Charles Dickens

“Rather than justice for all, we are evolving into a system of justice for those who can afford it. We have banks that are not only too big to fail, but too big to be held accountable.”

Joseph E. Stiglitz

“A leader should always be open to criticism, not silencing dissent. Any leader who does not tolerate criticism from the public is afraid of their dirty hands to be revealed under heavy light. And such a leader is dangerous, because they only feel secure in the darkness. Only a leader who is free from corruption welcomes scrutiny; for scrutiny allows a good leader to be an even greater leader.”

Suzy Kassem

“All the mega corporations on the planet make their obscene profits off the labor and suffering of others, with complete disregard for the effects on the workers, environment, and future generations. As with the banking sector, they play games with the lives of millions, hysterically reject any kind of government intervention when the profits are rolling in, but are quick to pass the bill for the cleanup and the far-reaching consequences of these avoidable tragedies to the public when things go wrong. We have a straightforward proposal: if they want public money, we want public control. It’s that simple.”

Michael Hureaux-Perez

“The rich run a global system that allows them to accumulate capital and pay the lowest possible price for labour. The freedom that results applies only to them. The many simply have to work harder, in conditions that grow ever more insecure, to enrich the few. Democratic politics, which purports to enrich the many, is actually in the pocket of those bankers, media barons and other moguls who run and own everything.”

Charles Moore

“A great leader must serve the best interests of the people first, not those of multinational corporations. Human life should never be sacrificed for monetary profit. There are no exceptions.”

Suzy Kassem

“Drive-in banks were established so most of the cars today could see their real owners.”

E. Joseph Cossman

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