To centralize or not to centralize?

The CEO's dilemma-were the gains of centralization worth the pain it could cause?-is a perennial one. Business leaders dating back at least to Alfred Sloan, who laid out GM's influential philosophy of decentralization in a series of memos during the 1920s, have recognized that badly judged centralization can stifle initiative, constrain the ability to tailor products and services locally, and burden business divisions with high costs and poor service.1 Insufficient centralization can deny business units the economies of scale or coordinated strategies needed to win global customers or outperform rivals. Timeless as the tug-of-war between centralization and decentralization is, it remains a dilemma for most companies.