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Distributed vs. Centralized Leadership

Henry has a decision to make. The disgruntled customer in front of him has a valid point. There has been a mix up on the part of Henry’s service team and things have not gone smoothly. It wasn’t the end of the world but the customer has already been inconvenienced and now the ‘fix’ is going to inconvenience him again. Henry feels that the considerations the customer is asking for are not unreasonable, but how can this be handled? How would your company handle it: using a centralized leadership model or a distributed leadership model?

Option A: Centralized Leadership Resolution

To make a decision, Henry has to contact his manager. The manager has to stop what she is doing, come to where the customer is, listen to the story, hear the customer’s request, determine if it’s reasonable and make a decision. Meanwhile Henry is standing there listening, waiting, and being unproductive. Only after his manager makes her decision can Henry resume his activity. Much time has passed and the customer is losing his patience and thinking about his time being wasted. If the customer is still not satisfied, he might ask to escalate his request to yet another higher level manager. His blood pressure is rising and if he’s not taken care of you can be certain that his friends and colleagues will hear about how they should stay away from Henry’s company.

Option B: Distributed Leadership Resolution

Henry has been trained and empowered to make decisions on the spot. He determines that the customer’s request falls within his level of approval authority. He graciously agrees with the customer and puts through the order immediately. The customer is pleased that it has taken only a minute and that his needs have been heard and satisfied with no hassle. He considers Henry his new best friend and tells all his friends that Henry’s company acknowledges and takes care of their screw-ups without drama. He says he’ll be back when he needs to buy again.  

In an organization you can have authority and decision-making ability centralized in top management or you can have it distributed among all the staff. Distributed leadership is when your employees are empowered to make decisions that benefit the customer and accelerate the operations of the company. Distributed leadership is a characteristic of high performance teams. When people are given the latitude to make their own decisions, they try new things. Initiative increases, productivity increases, and morale increases because people feel trusted. The leadership model, whether centralized or distributed, is a characteristic of a company’s culture and it is determined at the top. An executive who micromanages cannot generate a culture of distributed leadership because he’s concerned about maintaining control. Distributed leadership is about passing control to people on the front line so customers get taken care of easily and less time is wasted on everybody’s part. Costs go down and customer loyalty goes up. Shifting your company from a centralized leadership model to a distributed leadership model is difficult because of the ingrained habits that need to be changed. Habits come from attitudes, so the underlying attitudes need to be changed as well, especially at the top. Companies should do this more often because the benefits are so great.

Here are some things to keep in mind if you want to shift your company’s model towards distributed leadership:

  • The leadership will need significant help in changing their and others’ attitudes. They will no longer manage their areas like fiefdoms. They need to learn how to coach and collaborate rather than command and control. They have to give up power and change their views on authority. They often need to be coached because the shift is not easy. Others below them cannot make the shift if their managers don’t shift in their own roles. Their role needs to become one based more of service and support.
  • People need to be developed. You want people to make decisions when before they didn’t, but it’s not like flipping a switch. They are going to slowly grow into it, testing the new system to see if it is real or just lip service. They will gradually learn to trust their abilities and that management will trust them.
  • Strong (but not suffocating) operational guidelines help people make decisions that benefit the company as well as the customers. Sharing the vision and goals of the company helps the newly empowered staff make better decisions. Having clearly defined company values provides structure that guides staff and defines the brand of the company. Sharing some of the company’s finances also helps frontline employees make better decisions while weighing the customer’s needs and the company’s costs. People can’t make the best decisions in a vacuum so transparency and training is a prerequisite to shifting to this model.
  • Expect mistakes. When people are trying out their wings, they will make mistakes. Be sure to treat mistakes as learning experiences. Don’t eliminate the program or fire the employee when a mistake happens. You’ve just paid for that part of their training (learning from the mistake). So point it out for what it is, learn from it, and move on. The number of mistakes will decrease as people learn from them.
  • Review your hiring and performance management practices as not everyone will function well in a distributed leadership system. Some employees will weed themselves out as the changes will be too much for them. Make sure that when you hire new people you select candidates that are self-leaders, who are itching to serve customers, who can think for themselves and make decisions. There are some good assessments that can help with that. Contact me if you want to explore this further.

Many large, medium and small companies are moving in the direction of distributed leadership because of the advantages such as reduced costs, time savings, greater customer loyalty, increased morale and employee retention, great PR and word of mouth. Companies like Zappos, Jet Blue, Southwest Airlines, Best Buy, Nordstrom’s, Ritz Carlton Hotels, and Disney have turned it into part of their value proposition that helps them rise above the competition.

If you don’t move in the direction of distributed leadership, will you be left behind by one of your competitors who does? Have you steered your company towards distributed leadership or has your company steered you in that direction? We’d love to hear about your experiences. Thanks for your comments.