Concentrated or Distributed Power?

Since antiquity, philosophers have discussed whether power should be distributed among many or concentrated in a few decision-makers. Many modern organizations struggle to establish the appropriate structure to achieve the highest return on investment and social good.

For most companies, organization design is neither a science nor an art: It’s rather an oxymoron. Organizational structures rarely result from systematic, methodical planning. Instead, they evolve over time, shaped more by politics than by policies. This can result in a source of constant frustration for senior executives.

Based on the Pareto-principle (80% of the effects come from 20%), I would argue that strategic decision-making (strategy, product, and investment) needs to be concentrated. In contrast, operational decision-making (marketing, sales, and service) needs to be decentralized enabling complex coordination.

Arguments for concentrated power

Instead of a democratic approach, critical decisions need to be taken by a few leaders. Here are the reasons:

Reason 1: Unstable System if distributed

In Platon’s book ‘Republic’, Socrates raises several objections to democracy. Due to excessive freedom, democracy is under high risk. In a system in which everyone has a right to rule, all sorts of selfish people who are mainly motivated by their own personal desires can attain power. This might even lead to tyranny. The system should be, therefore, lead by morally and intellectually strong leaders. Plato calls such leader philosopher-kings.

Reason 2: Incompetent groups are steering the Ship of State

One analogy related to democracy is the ‘Ship of State’. Plato’s Socrates asks us to imagine a ship whose sailors are arguing about who should control the helm. They even don’t know about the craft of navigation. The actual captain, the one with navigation knowledge, is seen as a useless stargazer and thus never becomes the helmsman. For Plato, this person should be the leader and is considered to be a potential philosopher-king.

Arguments for distributed power

Plato’s philosophy about the best state can be seen as very idealistic and faces many valid critiques. One is how to ensure that the system will not lead to totalitarianism. Or how can we ensure that the philosopher-kings act in the best interest of the community? And how can a leader overcome his or her own bias to make the best decision?

Distributed powers has its merits, here are two reasons for distributed power:

Reason 1: Enabling discovery and innovation

Individuals made many great discoveries rather than government entities. For example, Christopher Columbus discovered the ‘new world’ on behalf of Isabella and Ferdinand of Spain. Therefore, the organization needs to support and embrace innovators that are responsible on a smaller scale. These people should be allowed to challenge the status quo to drive the necessary innovation. As Steve Jobs has said:

“It doesn’t make sense to hire smart people and tell them what to do; we hire smart people so they can tell us what to do.” — Steve Jobs

Reason 2: Achieving complex coordination

Distributed power also allows one of the hardest forms of innovation, which can be described as complex coordination. This approach requires taking many different available components and put them together in a unique way. The teams need to work in cohorts to produce the best result for every single product item.

The best example of this is Apple’s iPhone. Apple did take many components like the touchscreen, digital camera, mobile phone engine, other sensors, and put all together and introduced the ultimate smartphone in 2007. You only need one leader as Steve Jobs to connect the dots.

Successful combination

The right combination will also depend on the stage of the company. When a company is in its early-stage, it needs to find product-market-fit as quickly as possible. In a later stage, the company needs to have distributed power to suite its customers with their unique cultural requirements.

Combining concentrated and distributed power can result in a highly functional organization. I would argue that strategic decision-making (strategy, product, and investment) needs to be concentrated, while operational decision-making (marketing, sales, and service) needs to be decentralized enabling complex coordination. A true leader will be able to connect the dots.