Which two types of decisions should remain centralized in a decentralized decision-making environment?

In a decentralized decision-making environment, it’s important to strike a balance between empowering teams to make decisions and maintaining central oversight on certain key decisions. The two types of decisions that should remain centralized represent aspects of governance and risk management.

The first type, which involves decisions that come with a high cost of delay, is crucial because delays in these decisions can significantly impact an organization’s ability to compete, innovate, or respond to market changes. Centralizing these decisions ensures that there is a swift and coordinated response, reducing the potential negative impact of delays.

The second type, decisions delivering large and broad economic benefits, should also remain centralized because they have significant implications for the organization as a whole. These decisions require careful consideration of various factors, such as alignment with strategic goals and the potential for widespread impact across different areas of the business. Centralization in this instance ensures that the organization can realize these benefits efficiently, leveraging shared resources and strategic alignment.

Centralizing these types of decisions helps maintain oversight and alignment with the organization's strategic objectives, ensuring that teams do not act in ways that may lead to fragmentation or misalignment in pursuit of their goals. Decisions that are made frequently or are unlikely to change in the short term typically do not require centralized control, as they can