11 Min Read

Why Decentralized Teams are Essential

Today, businesses need to consider managing their teams better to remain competitive and agile. After all, everyone knows the world’s changing fast—but so are the ways we work. Customers now expect a faster pace of innovation from businesses they support. As a result, companies must respond quickly to market changes while controlling costs. One approach is the use of decentralized teams.

During the pandemic, companies had to go remote. However, since we've gotten used to living with Covid, there's a push-and-pull tension between managers and workers. Many workers want to stay with the flexibility of working remotely. In many cases, corporations and companies tell their workers to return to the office.

But hang on. It's not all or nothing. You can still have teams work in the office, in virtual teams, or in hybrid situations. The more important takeaway is that decentralized teams work better for your company. When you decentralize your divisions, you switch from centralized management structures to decentralized teams.

That means that decision-making and accountability get pushed down to individual team members. And it means relying much less on executives for every decision. That enables teams to respond faster and adapt more quickly to market changes. However, it’s not just about decentralized teams. It’s also about decentralizing your management structure.

Why Decentralized Teams are More Agile

Before moving on to why decentralized teams are more agile, let's first talk about what agility means in the context of teams. Agility is the ability to respond quickly to changing conditions and customer needs. To do this, companies must respond faster, act more nimbly, and be more flexible in their approach.

Sure, the centralized approach to business management is familiar. But it’s also shown to have many downsides for businesses. And that’s especially true when it comes to agility. For example, centralized management can lead to the following:

  • Longer decision-making processes.
  • Slower adoption of new technologies.
  • High job satisfaction but low employee engagement.
  • Fewer opportunities for employees to develop new skills.

Does Everyone Need to Decentralize?

As we’ve discussed, centralized management has its flaws. However, decentralizing your teams may not always be the solution. If your business requires strict regulatory standards, decentralizing your teams may cause more harm than good. But, if that’s not the case, you can maintain high performance across all groups with decentralized teams.

Moreover, if you decentralize your management structure, you can add to the benefits of decentralizing teams. In reality, companies must be flatter in a fast-paced world, and teams must be more autonomous. The centralized business structure of managers and divisions is not an agile one. The better approach is to lean into multi-disciplinary squads that assemble and disassemble depending on the goals and needs of the company.

The Problems with Centralized Management

Decentralized teams, including management, can help make your business more agile. But let’s say your business is centralized. You need to know some problems associated with centralized management teams. In so doing, you can weigh the pros and cons of centralization versus decentralization.

As mentioned, centralized business structures have a higher incidence of the following challenges. For instance, they take longer to make decisions because everything gets filtered through management. In the knowledge age, they’re slower to adopt new technologies—at least the ones that make sense. In other words, they’re not strategic about tech.

We also know that centralized management depresses employee engagement. And that makes sense centralized companies don't foster cultures of experimentation and innovation. As a result, teams don't try new things or develop new skills. But what else happens when companies that should have decentralized teams and management don't?

  • Decentralized teams tend to have better communication than centralized teams because information doesn’t have to get filtered through management before it reaches other team members.
  • Since decentralized teams are self-managed, they’re responsible for collaborating with other teams when necessary. In centralized teams, collaboration typically happens through management. And that can lead to divisions not working well together and not being as productive as possible. On the other hand, decentralized teams can better collaborate to solve problems and develop creative solutions. It’s because they’re given more freedom to do what they need to do.

The Benefits of Decentralization for Your Business

Decentralized teams and management can benefit your business in many ways. For instance, you can flip the negatives of centralization. For one, it can help to increase employee engagement because teams feel empowered. The more ownership people feel, the more they want to work through the problems and succeed. And that inevitably leads to improves productivity.

Decentralizing can also help improve your consistency across teams. Overall, decentralizing can help you make your business more agile, efficient, and effective. Further, decentralizing teams can also help to reduce costs by allowing you to outsource tasks such as customer support or managing inventory.

At a time of hyper-competitiveness, it's vital to have high-quality and high performance. In the knowledge era, when teams must make real-time decisions, decentralized teams empower teams to take ownership. They're part of your success even if they don't own your business. As a result, it can help make your business more scalable without sacrificing quality.

It's Time to Change the Ways Businesses Operate

As mentioned, the world is changing fast, and so is how we work. In short, the genie isn’t going back in the bottle. Centralized teams for most businesses existed during a time of mass consistency. What we can all agree on now is that there’s no consistency or stability—ever.

Moreover, as technology and machine learning exponentially increase in power, companies need decentralized teams to make critical decisions quickly. It's like being in a rocket ship with its panel blinking red, and the captain says they can do nothing until ground control tells them. Sometimes, things just can't wait, and teams must make decisions.

Decentralized teams help to create more agile businesses. It allows teams to make decisions quicker, respond faster to changes in the market, be more flexible and adaptable, and be more productive and experimental. So, to remain competitive and agile, many businesses should switch to decentralized teams where decision-making and accountability get pushed down to teams.

The centralized approach was the norm for a long time. However, as technology advances, businesses must adopt new ways of working. So, business leaders must think long and hard about this operational issue. In sum, centralized management is no longer the best default option.



Ben Stroup is Chief Growth Architect and President at Velocity Strategy Solutions where he helps leaders design, develop, and deploy smarter business growth strategies. Ben is a futurist, disruptor, and data champion. He leads a team that takes a structured learning approach to business challenges, which allows them to assist leaders in bridging the gap between ideas, innovation, and revenue—taking ideas from mind to market.

Velocity Strategy Solutions is an on-demand, next-generation business strategy and management consulting firm which provides clients with a relentless focus on data, execution, and results that positively impact the bottom line. Velocity delivers integrated people and revenue strategies combined with a disciplined approach to growth architecture that elevates the capacity of leaders, teams, and organizations to succeed and win more.

Topics:   Leadership