Structure – the power enabling organisations to deliver value

March 2025 | SPOTLIGHT | BOARDROOM INTELLIGENCE

Financier Worldwide Magazine

March 2025 Issue

Without structure, it is impossible to focus organisational resources so that markets and communities can be serviced. More importantly, the nature and shape of this structural configuration ultimately determines how competitive advantage and value is realised.

The oldest debate

The debate around structure has ancient origins and essentially harkens back to military decision making, where strategic discussions focused on how best to position resources to defeat the enemy.

A centralised military command has the advantage of concentrating on the development of strategy and providing clear oversight of its execution by a small group, namely the senior officer corp.

In contrast, decentralised structures offer adaptability and quick response to changing conditions. The command structure is broadened, and effective coordination becomes a necessity if the war is to be won.

Neither of these two structural forms are ‘right’. It all depends on circumstances and leadership aspirations.

Although initiated by the military, structural design has now become a fundamental consideration for private and third sector entities.

However, over time, attention to the human experience of working in any single structural shape or other has slowly predominated over the very purpose of the structure.

In effect, what individuals feel about working within a particular structural configuration is given more attention than whether the structure ‘has done its job’. Decentralisation is no exception.

Are decentralised companies more responsive?

Decentralisation has emerged as a significant organising principle for modern businesses, capturing the interest of practitioners and theorists alike. Its appeal lies in its perceived compatibility with the fluid conditions of contemporary markets, and its alignment with the evolving expectations of today’s workforce.

Decentralisation offers to empower people, speeding up decisions and creating a culture where collaboration and innovation thrive.

By reducing layers between the top and bottom of decision makers, companies are considered more adaptable and responsive to market needs.

Traditionally, more siloed authority-leaning structures have long been the backbone of the corporation but are now being viewed increasingly as hindering the organisation.

More companies are decentralising and distributing authority to foster a more collaborative and less hierarchical environment. The idea here is not to eliminate executive roles, but to rethink how leaders can better support their teams in a fast-paced and changing world.

Decentralised autonomous organisations

Another reason decentralisation is becoming favoured is the upsurge of decentralised autonomous organisations (DAOs) as an outcome of blockchain technology.

DAOs represent an extreme form of cyber decentralisation where the concept of a central authority is negated. Ownership and decision-making power are distributed across a pseudo-anonymous network of participant investors.

These DAOs operate without a clear division of power, roles or even labour, relying instead on peer-to-peer networks for governance, validation and decision making. The decentralised nature of DAOs is underpinned by smart contracts – self-executing agreements with contract terms written directly into the code.

Smart contracts function within blockchain protocols, ensuring that they act automatically and without the need for any central intermediary.

Decentralisation challenges authority

The dramatic growth of DAOs has encouraged organisations to experiment with decentralisation, but within traditional hierarchical forms.

From more centralised sources of authority, some organisations are aiming to democratise decision making, permitting greater access and reducing the potential for abuse.

However, an issue which has been recently identified is that decentralisation challenges the very nature of authority. In decentralised entities, authority relations become more complex and multidirectional, compared to more established systems where operators ‘know their place’ in the hierarchy.

Increased tension and conflicts can often arise over the legitimacy of decisions and related actions.

As a result, the clear lines of authority in hierarchical models can become blurred and, even within DAOs which are designed to operate without centralised control, off-channel human interactions, such as collective decision making and voting, play a crucial role in governance.

Decentralised configurations award executives greater discretion for them to be responsive to the dynamics of their context. Actions taken should account for changing market conditions, stakeholder expectations and reactions, varying investor demands and cultural differences.

Considerable variations of response are likely to range from one colleague to another, which can be an advantage or a problem, depending on the context.

The essence of discretionary action is focused on self-determined assessment, which is the antithesis of corporate consistency. While each executive may fully justify their own actions and decisions, a variance of motivations and behaviours can lead to misalignments between the leaders and possible stakeholder mistrust.

Structure designed to realise value

To be clear, decentralisation is a structural design for realising value. It is not a philosophy or deep-seated sentiment for enhancing quality of the work experience.

Accurately determining competitive advantage by considering the unique elements of the organisation, service culture, quality of products and services, pricing, brand strength and stakeholders’ legacy is key.

The more centralised the entity, the more competitive advantage is exercised through cost disciplines, product and service development quality control, and consistent, disciplined presentation of the brand, especially at a global level.

The more decentralised the organisation, the more competitive advantage is realised by its closeness to local markets and communities, which enables adaptability, service quality and loyalty across numerous customer bases.

Both configurational forms feature advantages and disadvantages.

In the case of centralisation, a lack of adaptability and reliance on volume limits innovation.

With decentralisation, high quality delivery of products and services is often undermined by misaligned views around the type of competitive advantage to pursue.

Decentralisation also spawns a greater number of leaders involved in strategy creation and delivery. This can mean disagreements between the board, within the C-suite, and between the two regarding which competitive advantage to pursue.

In addition, the views of general managers, particularly the divisional and subsidiary managing directors, are critical in determining the resources required to pursue competitive advantage.

The intricacies of market dynamics teach us that different forms of competitive advantage may need to be concurrently pursued by locality. For example, competitive advantage in China can be vastly different to Europe, the Middle East and Africa, even for a corporation positioning the same products and services worldwide.

Streamlining decentralisation

As misalignments and tensions between senior executives are more likely to arise with decentralisation, it is important to enhance the quality of top-level interactions.

Continual engagement between leaders reduces the level of tension and disaffection and requires the adoption of three essential disciplines, as outlined below.

Work role clarity. Clearly defining and communicating the responsibilities and authorities associated with each key discretionary role within the structure is paramount. The clearer and more detailed the boundaries of authority, the easier it is for individuals to operate within these roles and ensure the system remains robust and adaptable.

When leaders and employees respect boundaries, the outcome is robust and positive personal relationships. The maturity to engage through misalignments also increases.

Accountability clarity. Creating a culture of transparent interaction while respecting role domains ensures attention remains focused on accountability. This, in turn, enables trust between executives. Performance-related conventions become the norm, and this reduces the influence of status, personal interests and internal politics.

Top team status. At the annual ‘Strategy Away Day Conference’ the chair of a major global entity required the board, C-suite and general managers to fully participate in debates. “Strategy and its delivery are two sides of the same coin,” he insisted.

The conference was hailed as a great success. Likely challenges were foreseen and addressed, and by year-end substantial cost savings and opportunities were realised. In decentralised entities, determining the desired membership of the senior executive is critical to ensure a high quality strategic and operational contribution.

In many companies and third sector entities, general managers are not considered as an extension of the C-suite. Instead, they exist to implement the C-suite’s decrees.

All too often the centre ignores local developments which impact on competitive advantage. In reality, general managers robustly inform the centre of market and stakeholder developments, especially those that could harm the organisation, despite punitive measures being taken against them for not being team players.

It is especially important in decentralised organisations to establish who and who is not in the ‘top team’. The answer to this question always requires open acknowledgement for decentralisation to function effectively.

Sustaining decentralisation

In many senses, decentralisation stimulates creativity and engagement, but over time, it can be a common experience for many employees that they start to feel lost in a sea of ambiguity.

As a result, some organisations are shifting back to a more traditional structure as they recognise that flatter models are not the ‘one size fits all’ solution they might hope for.

The challenge for the board and C-suite lies in their shared understanding of the changing and contradictory nature of competitive advantage.

With this insight, leveraging an extra edge often involves moving people sideways, acquiring new skills and broadening expertise. How such processes are handled determines whether employees find purpose and fulfilment, even if their career paths are not linear.

Grounding authority and accountability in decentralised structures requires organisations to foster a collective effort among critical members, encouraging them to adopt new perspectives on their relationships.

Shifting toward decentralisation is not a one-time structural change, but an ongoing process marked by continuous tensions. While decentralisation offers numerous benefits, there will always be areas within an organisation where centralisation is necessary. At times, stringent disciplines concerning costs and procedures need to be enforced.

Leading through tension is a normal part of the process and requires a delicate balance of maintaining the benefits of decentralisation while carefully integrating alternate structural forms as required.

To be successful requires a commitment to continuous improvement, clear communication and a willingness to adapt to the evolving needs of the organisation and its members. Knowing when and how to decentralise or centralise is the key.

Andrew Kakabadse is professor of governance & leadership and Nada Kakabadse is professor of policy, governance and ethics at Henley Business School. Mr Kakabadse can be contacted on +44 (0)1491 418 776 or by email: a.kakabadse@henley.ac.uk. Ms Kakabadse can be contacted on +44 (0)1491 418 786 or by email: n.kakabadse@henley.ac.uk.

Andrew Kakabadse and Nada Kakabadse

Henley Business School