The problem with centralising the strategy

In times such as these, the source of strategy must move closer to the centre.

During times of relative prosperity and wealth, strategies can afford to be local.  One organisational unit can afford to have a different strategy to another, as long as the organisation is sufficiently large.  Such diversity allows for business needs to be met in a timely fashion, and any inefficiencies that result are mere noise compared to the benefits perceived.  (Note my avoidance of the word “realised”.)

In leaner times, the inefficiencies associated with localised strategy cannot be justified.  What was believed to be “business need” is often discovered to be “business want”, and so the promotion and proliferation of localised strategies to meet those wants is seen as wasteful.  Instead, strategy is drawn towards the centre, the local organisational units becoming more involved in implementing the strategy and managing tactical initiatives as opposed to defining and shaping the strategy.

In the private sector, the board and finance departments take control from the departments.  In government, the Cabinet Office and HM Treasury take control from the Departments.

The difficulty lies not in the centralised model itself, but in the shift from one model to the other.  By devolving the strategy in the first place, the local departments (capitalised or otherwise) diverge from one another.  Oracle pops up here, SAP there.  Where Microsoft abounds in one area, open source thrives elsewhere.  Macs/PCs, Firefox/IE, Autonomy/Google, the list goes on.

So when strategy is overnight drawn towards the centre, change is necessary.  And change costs money.  And money is scarce, certainly in government—both within delivery departments and centrally.

What this means is that strategy will be slow to pervade.  Very slow.  Departments will not be able to make wholesale changes—there simply isn’t the money to do so.  Only at points where investment would have occurred anyway will departments have the opportunity to embrace the strategy.  And even then, if the shift to align to the strategy is more expensive than continuing down the previous trajectory, then the additional spend will have to be justified.  Moreover, these investment cycles will become fewer and further between, hardware being asked to run for longer and software and operating systems continuing after the warranty and support have expired.

So the move towards a common strategy will be slow.  Possibly so slow that by the time alignment is felt, strategy will again be devolved.  Only time will tell.

Comments

2 Responses to “The problem with centralising the strategy”

  1. SLATFATF on August 4th, 2010 14:26

    Its like the old consultancy joke. Which is better, centralization or decentralization? Answer: depends where you are starting from.

    I may be wrong, I often am, but there may be a few concepts mixed up here. Centralization and decentralized strategy is different to single strategy vs multi strategy. You seem to assume that to get single strategy you must centralize and this is far from the case. Centralizing moves you to a command and control position and for that to be successful you need authority over the people you command and control. This is not the case in gov.

    The second point is that centralization of strategy will only work if the people in the center understand the business they are supporting. The further from the business you go, the less likely your strategy will work for the businesses and the more likely they will simply (have to) ignore it.

    What is needed is an agreed strategy across gov and all parties should contribute to ensure that it works for their business. So the only central command that is then needed is that they will all work together to create a single strategy.

    Collaborative and joined-up is the key. Not command and control.

  2. Art Vandelay on August 7th, 2010 16:05

    And get rid of the consultants.

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