Conclusion


Conclusion

Empowerment is currently one of the most popular business buzzwords. But is it just a fad? Will it soon pass the way of countless other business trends? The logic in this article shows why greater decentralization in business is not just a fad but a response to fundamental changes in the economics of decision making enabled by new information technologies. Of course, decentralization may never occur in some cases, and greater centralization may occur before increased decentralization in others. But in the knowledge-based economy that is emerging, globally connected, decentralized decision makers will play increasingly important roles. Figuring out how to design effective decentralized systems and how to manage the continually shifting balance between empowerment and control will not be easy. But I believe that mastering this challenge will be one of the most important differences between organizations that succeed in the next century and those that fail.



Acknowledgements

This chapter is reprinted with permission from Sloan Management Review 38, no. 2 (Winter 1997), 23–36. An earlier version was presented at the Harvard Business School Colloquium on "Multimedia and the Boundaryless World" to be published in S. P. Bradley and R. L. Nolan, eds., Multimedia and the Boundaryless World, Boston: Harvard Business School Press, 1997. Portions were also included in a presentation at the International Conference on Information Systems, G. M. Wyner and T. W. Malone, "Cowboys or Commanders: Does Information Technology Lead to Decentralization?", in Cleveland, Ohio, December 15–18, 1996. The author acknowledges the support of the MIT Center for Coordination Science and the MIT Initiative on Inventing the Organizations of the 21st Century, the excellent research assistance of Andrea Meyer, and helpful conversations with George Wyner, Erik Brynjolfsson, Art Kleiner, and Albert Wenger.



Notes

  1. See, for example, Johansen, Saveri, and Schmid 1995.

  2. See, for example, DiMaggio and Powell 1983; Galbraith 1991; Huber and McDaniel 1986; Markus 1983; Schein 1985; Scott 1992; Thompson 1967.

  3. Our model is particularly intriguing in this regard because, unlike previous models (for example, Gurbaxani and Whang 1991), ours shows how a simple model can explain changes in both directions while nevertheless predicting a broad change in one direction in the long run.

  4. Leavitt and Whisler 1958.

  5. For summaries of previous research, see, for example, Attewell and Rule 1984; George and King 1991.

  6. For a previous paper that makes this distinction, see Anand and Mendelson 1995.

  7. See, for example, Chandler 1977.

  8. Stevenson 1994; see also Anand and Mendelson 1995.

  9. Fox 1994.

  10. Walton and Huey 1993.

  11. Dvorak, Dean, and Singer 1994.

  12. Keenan 1994.

  13. Ibid.

  14. Denend 1994.

  15. J. Kalb, quoted in Saxenian 1994, x.

  16. See, for example, Malone, Yates, and Benjamin 1987.

  17. von Hippel 1994.

  18. For useful discussions of these issues, see, for example, Jensen and Meckling 1973; Gurbaxani and Whang 1991.

  19. Richman 1987.

  20. Stoddard 1986; see also Bruns and McFarlan 1987.

  21. Keenan 1994.

  22. For a description of how electronic and other communications media are used in different ways, see Daft and Lengel 1986.

  23. See, for example, Hackman and Oldham 1980.

  24. The mathematical proof of this result is given in Wyner and Malone 1996.

  25. Sullivan 1995.

  26. See, for example, Handy 1992.

  27. Interestingly, even military organizations are now moving away from this extreme form of centralization. See, for example, Smith 1994.

  28. See, for example, Breuner 1995; Nocera 1994.