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Centralization: How to Structure Decision Making in the Team

Shared leadership tends to better team performance.

· team

Concept: the distribution of decision making authority
E.g, will decision making authority be allocated to a single team member or shared among team members?

Centralized vs. decentralized structures
The benefits of centralized versus decentralized structures depends on task type:

  • Creative, problem-solving task = decentralized structure (flexibility)
  • Executive-focused task = centralized structure (efficiency)

Source: Stewart and Barrick, Academy of Managment Journal, 2000

How do teams with no formal authority structure distribute team leadership roles?

The different leaderships:

  1. Shared leadership
  2. Centralized leadership
  3. Leadership void

Shared leadership tends to better team performance.
The more centralized the decision making is, the worst the team performs.

When do you want centralization vs. decentralization?
Centralized authority:

  • Less team interdependence
  • Execution-focused tasks
  • Low complexity tasks
  • High diversity in experience

Decentralized/ shared authority

  • Greater team interdependence
  • Creativity-focused tasks
  • High complexity tasks
  • Low diversity in experience

Source: Hoch et al., Journal of Personnel Psychology, 2010; Pearce and Barkus, Academy of Management Executive, 2004

Be careful: switching is not simple
Switch from decentralized to centralized has a high negative impact on team performance.
The switch from centralized to decentralized is less negative but still negative on team performance.

Source: Hollenbeck at al., Oragnizational Behavior and Human Decision Processes, 2011

Conclusion:
Switch has a cost.
If you can afford to stay in your current structure, your team's gonna perform better on average.
Because the norms that are created from the original structure persist in the new structure.
 

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