Does centralized control of the enterprise eliminate politics

Dear Bob …

In “Hypervisory organizational design,” (Keep the Joint Running, 8/18/2008) you said,”… the question of how to allocate system resources is algorithmic. The question of how to allocate business resources is, in contrast, algorithmic only in theory. In practice it is inescapably political.”

It doesn’t have to be. It’s political only if corporate does not have control of the enterprise.

A good dynamic programming approach will solve any excess demand problem to the betterment of the entire corporation.

What is usually failing is fairly rewarding divisions/departments that give up resources to the better good of the entire enterprise. When their pay and bonuses are only computed on how much they do to bring in revenue (which means they need more resources for sales and manufacturing) then there is pushback and internecine squabbles.

If the top brass is in control and fairly rewards everyone for maxing the enterprise’s results there will be no problems.

Decentralization can be good. But it can lead to cannibalization if two divisions attack the same market independently. Bad enough fighting the competition without fighting your own company too.

Toward the end of the article you compared attitudes toward corporate headquarters to attitudes about the federal government. There’s an old saying: Be glad you do not get all the government you paid for.

Comparing government and business is misleading. They need different solutions.

– Commenter

Dear Commenter …

Sorry, no. If corporate has full control over the enterprise … it’s fooling itself. The business units, functional divisions or what-have-you control the flow of information corporate uses for decision-making. Even with a very good system of metrics and reporting in place, individuals within the hierarchy will always find ways to benefit by spinning information.

And, strong central headquarters are notorious for being political cesspools, specifically because too little customer contact happens there and they are insulated from where the action is.

So long as human beings are self-interested actors, companies will have politics. Central control doesn’t change that at all.

As far as government and business needing different solutions, I agree completely and have said so many times. Among the differences: We’re government’s owners, not its customers.

My comment had nothing to do with solutions; everything to do with attitudes toward each, which are similar whether they should be or not.

– Bob