Generalize the principle:

Centralize the Models and decentralize the Operations


But the "Purchasing" Organizational unit is overloaded: calls from shops don't always get through.

The "Purchasing" Organizational unit has become a bottleneck that risks putting the shops at a disadvantage…

Generalize the principle: "Centralize the Models and decentralize the Operations". The role of the centralized Purchasing Organizational unit is to define the ingredients and to reference the suppliers, not to place the orders.

The role of the "Purchasing" Organizational unit is limited to defining the best ingredients and purchasing conditions (centralized Model). Each baker places his orders directly (decentralized Operations).

  1. To centralize or not to centralize…

    "Centralize" means

    but
    • heavy to manage: economies of scale can be insufficient to compensate for the increased cost of complexity
    • demotivating for the decentralized teams

    "Decentralize" means

    • simplicity of management for the Enterprise boss
    • autonomy of the teams
    but
    • heterogeneity of the Models: staff rooted in autonomous decentralized Organizational units
    • multiplication of investments
    • difficulties to exchange best practices

    Enterprises navigate between both forms of organization, some do not hesitate to alternate between them.
      See Challenges (09/11/2013): pourquoi certains souhaitent supprimer les fonctions de support centralisées (article in French: why some would like to get rid of centralized support functions)

  2. Centralize the Models and decentralize the Resources

    A third form of organization exists which enables us to have our cake and eat it: centralize the Models to standardize the Processes, Roles and Information; but, decentralize the Resources to leave local teams with some autonomy.
    Let's take some examples:

    • Production
      • Centralize the Process Models, the way we Produce
      • Decentralize the Production in different locations where each one manages its purchases, its staff, its premises while respecting the Production Model
    • Distribution
      • Centralize the Offer Models (the definition of what we sell) and Distribution Models (how we sell)
      • Decentralize the Distribution Resources, as happens with Franchises
    • Human Resources Management
      • HR Management centralizes the Models: recruitment Model, training Model, evaluation Model
      • Each Organizational unit applies the Model locally: it manages its own staff while respecting the general rules defined in the Model

  3. The organizational structures for the Operations and Transformation are not parallel

    To apply this rule:

    • The Transformation teams are organized by Model group.
    • The Operational teams are organized by geographic region, or by Product line, or by Process domain.
    This means that the organizational structures for Transformation and the Operations are not parallel.

    Remark: the geographic division which was predominant in the Operations, in view of the time taken to move things around, is being gradually replaced today by a split by product line (e.g., Products for the enterprise or the individual) or by Process domain (e.g., separating Production from distribution).

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The story of George the Baker is made available under the terms of the
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