Decentralization in Family Businesses: What is Our Role in Advancing Autonomy and Innovation Within the Businesses?

By Shweta Rathore

Decentralization, as a concept, has come to be recognized as an important tactic in fostering innovation and improving agility and in some cases, making fast and effective earnest decisions even in family-owned enterprises. Maximizing the potential of our employees enables us to strategically decentralise authority and create a fluid competitive atmosphere. Still, the degree to which these decision-making systems can be effective depends on the degree to which the systems themselves are embedded in the daily routines of the firm. We are in charge of allowing autonomy to be exercised even as the organization’s purpose and key priorities are maintained.

Decentralization in the Working Routine of the Firm

The family businesses’ problem and our problem as well is how to utilize the decentralization policy without having it affect the central unity and common purpose which family businesses are characterized with. Among our typical approaches are:

• Elimination of role ambiguity:The first step that we tackle is developing role profiles that clearly communicate the responsibilities of positions or job functions at various strata of the business. In consultations with the management, we develop an understanding of the various decision-making levels that distinct teams, departments or individuals will be able to perform. This prevents the blurring of boundaries and ensures that all personnel are aware of their area of performance.

• Leadership Development Programs: Decentralization often allows more people to take part in decision-making. We guarantee that leaders at all levels receive the necessary skills through leadership development programs. These programs prepare the leaders by imparting the skills of strategic thinking, productivity, and goal alignment to the company so that they are ready to make decisions rationally.

• Performance Metrics and KPIs:We evaluate the influence of decision making through our performance metrics which affects the overall business metrics. We make sure that when making decisions the spread of authorities remains consistent with the overall corporate strategy of the organization. This enables us to leverage the benefits of structure and accountability without the need to manage every detail of how tasks are performed by the employees.

• Communication Channels:The first principle that should succeed any decentralisation is the concept of communication. We have communication systems in place that allow for the timely transfer of information across various functional units of the organization so that even with the decentralization of branches of the business, there would be a unity of purpose in the broader corporate framework.

How to reconcile individual preferences with a common big picture

Decentralization encourages the employees’ greater job autonomy which may result in higher job satisfaction and internal motivation. However, in family businesses where the heritage and the brand are geared towards its values, the two concepts must be somehow reconciled: individual autonomy and the need for a collective overriding focus.

This balance is attained through various strategies that include:

• Core Value Workshops: These sessions are intended to help employees internalize the fundamentals of the organization. Employees are apprised of the higher-level rationale of the undertaking so that even when they are allowed to make business decisions, it is understood that these decisions contribute to the vision of the business in a more strategic context.

• Inclusive Decision-Making Frameworks: To this end, we encourage individual autonomy. However, engaging individual autonomy, self-esteem, and internal motivation to contribute to the goals set for an individual’s decision and to achieve the organization’s objectives are within the core values of the organization. While nurturing creativity in employees is important, it is also important to promote the direction of the business that is collective in nature.

• Mentorship and Guidance:In family businesses, it is common for the elder generation to take the role of mentorship, in that the elder generation can take the initiative to pass down their core values to the next generation of managers. We manage these mentorship programs, working to let these mentors pass their knowledge in a manner that is not compressing the ideation process.

Positive Effect of Decentralization on the Decision-Making Process and Managing Conflict

Family businesses are quite sensitive to problems of decentralization including those relating to decision-making and innovation. Giving authority to employees at different levels means that there will be a wider scope for making quick decisions. This is one of the core activities we benefit from to achieve these targets as well as encourage open communication, training and instil trust.

For example, the upper management is not the ones who are holding the toggle switch anymore. Department managers who work with their people understand their needs and should be able to decide quickly. This reduces redundancy, increases efficiency and resilience of the organization in regaining its foothold during disruptive changes in the marketplace.

We believe that employees should not only come up and express their ideas, but also take ownership of their work and see their ideas through to completion. Employees who consider their voice to be important will be more inclined to come up with ideas as well as solutions that are outside the box. We make it a point that autonomous teams have the capability and independence to initiate new projects without the worry of failing.

Our business is a good example of effective decentralization in practice as our regional managers are empowered to make autonomous decisions on local marketing or operational strategies. The region was thus, able to adopt the marketing strategies that were in line with the purchasing patterns of the consumers. This we supported by offering training and ensuring regional managers understood the broad objectives of the company.

Decentralization has many advantages, but it is also not without its challenges. Organizations might experience push-back, including reluctance from employees who have always been under a centralized decision-making system. Furthermore, there is the potential for a lack of consistency, whereby decisions made in a decentralized manner may contradict the company’s strategy.

Employees fear change or distrust in their ability to make independent decisions, which could lead to employee resistance towards sustaining a decentralized model. Employees’ leadership and decision-making capabilities are cultivated through comprehensive training and development programs. We emphasize management of employees’ support needs with regular communication and feedback throughout the transition process.

Employees expressing fear or concern regarding staff deployment in the decentralized model can help address some of these, and building trust is very important when deploying staff within a decentralized structure. Our solution is decentralizing teams while establishing standard processes and guidelines that must be adhered to. It enables ease of autonomy while also ensuring that the teams’ decisions are aligned with the company’s core principles and overarching frameworks.

There are also potential downsides to this design choice as decentralization may enable poor decisions through poorly defined centralization. Employees’ autonomy is maintained by balancing the scale with enabling mechanisms such as approval levels for reaching significant decisions and regular internal control procedures for evaluating the effectiveness of the decentralized teams.

The decentralization process may work for family businesses rather well, granting them increased flexibility, effectiveness and quicker decision processes. Yet, such effects cannot be achieved without considerable efforts to embed decentralization as an operative model into the organizational culture of the company. Making sure that clients have unambiguous role descriptions, upholding uninterrupted communication channels, and preserving essential principles enable us to assist family businesses to derive maximum dividends from decentralization and remain focused on sustainable strategies. We manage affairs in such a way that independence and cohesion are complementary in nature and there is an enabling environment for creativity to flourish.

(The author is Shweta Rathore, GM – HR, Ajmera Realty & Infra India Ltd, and the views expressed in this article are her own)