If you get this, you have almost everything you need to know. (Almost.) Tom Peters in In Search of Excellence: Lessons from America’s Best-Run Companies:
Any well-functioning organization is neither centralized nor decentralized but a wonderful combination of both. Around most dimensions the best companies, then and now, are loose. They give people exceptional freedom to do things their own way.
At the same time, the great companies are highly centralized around a few crucial dimensions: the central values that make up their culture, one or two (no more) top strategic priorities, and a few key financial indicators.
Note: The key point is not simply that organizations need to be centralized in some areas and decentralized in others. If you say to yourself “great, the fact that every organization ought to have certain non-negotiable realities means I should micromanage my people and tell them what to do in whatever area I want,” you’ve missed it.
The key point is exactly where a company should (and should not) be centralized. It should be centralized in its core values — they are not up for grabs and are not negotiable. It should be decentralized in relation to letting people find their own way to accomplish the objectives of their roles.
In other words, precisely because the mission and core values of an organization are specific and tightly defined, employees are able to have great freedom in almost every other area.
I know of some organizations that get this backwards — they stray in relation to their core values, but are tightly controlled according to the leader’s wishes in almost every other area. That’s backwards. The key to a great company is unleashing your people, which is possible from making your mission and values clear — and meaning it.