To centralize or decentralize? + Why RACI sucks 🧐
Shall we centralize or decentralize? It's a recurring organizational design dilemma. Shall we centralize IT, finance, compliance, HR, etc? Or regional: what autonomy should we give the country organization vs. centralize in the 'group' organization?
We often work with business units that wrestle with the downsides of centralization when trying to accelerate their business outcomes. When dependent on a centralized function, they feel the pain of lacking autonomy and authority, long waiting times, unhelpful standardization, and more.
However, when turned upside down, the design choice of centralization may have outsized benefits of lower cost, more control, and higher quality.
The fact of the matter is: there is no one perfect way. There are only trade-offs.
One design choice will promote specific outcomes while reducing other outcomes. And vice versa.
Often, the objective is to accelerate the teams at the 'edge' (where the organization touches the customers and marketplace). In that case, how might we think about centralization?
We can take inspiration from self-managing organizations. There, the default is that everyone is empowered unless explicitly constrained: there is no hierarchy to start with. Laloux wrote about the concept of reverse delegation:
"The expectation is that the frontline teams do everything, except for the things *they* choose to push upwards."
To put this into practice, consider these two heuristics when making design choices:
Centralize only where it accelerates the teams at the edge
Distribute as much authority to the edge of the organization as we can stand
Read more about design principles in this article on The Ready’s blog: How to pick the principles that will actually change your organization (6 min read).
The problems with RACI
RACI has so many shortcomings, I don’t even know where to start. I captured this amazing thread several years ago but found it when looking for old notes.
How to talk to customers
The #1 skill to master to grow your business is having great customer conversations.
By default, customer conversations are bad. But they don't have to be.
I just finished reading The Mom Test by Rob Fitzpatrick. A classic (but short) book on the craft of customer discovery.
Some rules of thumb from the book:
People will lie to you if they think it's what you want to hear.
Anything involving the future is an over-optimistic lie.
People know what their problems are, but they don't know how to solve those problems.
If they haven't looked for ways of solving it already, they're not going to look for (or buy) yours.
The book is titled The Mom Test because following these rules will lead to questions that even your mom can't lie to you about:
Talk about their life instead of your idea
Ask about specifics in the past instead of generics or opinions about the future
Talk less and listen more
The questions to ask are about your customers' lives: their problems, cares, constraints, and goals. You aren't allowed to tell them what their problem is; in return, they aren't allowed to tell you what to build. They own the problem; you own the solution.
To run the process:
You always need a list of your 3 biggest questions. You should be terrified of at least one of the questions you're asking in every conversation.
A customer conversation doesn't need to be a meeting with a formal interview. Figure out where your customers are, hang out there, and have casual chats if possible.
At their best, these conversations are a pleasure for both parties. You're probably the first person in a long time to be truly interested in the annoyances of their day.
After the meeting: review your notes and key customer quotes, update your beliefs and plans, and decide on the next 3 big questions.
I work at The Ready — a future-of-work consultancy committed to changing how the world works — from business as usual to brave new work. We help organizations remove bureaucracy and adapt to the complex world in which we live.
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