Economy & Politics

ColumnWhy corporations are rediscovering decentralization

Personal-Financial.com columnist Bernd ZiesemerMartin Kress

If you ask Roland Busch, the future Siemens boss, in these weeks what he wants to do differently than his powerful predecessor Joe Kaeser, then the keyword “decentralization” will almost certainly come up. You want to get closer to the markets again – and that is only possible if you give the operating units of the global corporation more freedom of choice. Because Siemens wants to distinguish itself much more strongly than before as a digital company in the future, more speed is needed at all levels. And Busch is convinced that this cultural change cannot be organized from above by ordre de Mufti alone.

The new Siemens boss is trendy with his line. Since he took office in May 2018, BASF boss Martin Brudermüller has also opted for decentralization. Almost 20,000 employees migrated back from the Group’s many central departments to the operational units. Some of the central departments even blessed the time – for example further training. Surprisingly, even a CEO has been talking about decentralization for some time that one would least have expected: Herbert Diess. The CEO of the VW Group published an opinion piece on the “transformation” of the company in the “Handelsblatt” on Friday. Diess sees an important success of his tenure as the fact that under his direction he has succeeded in “grinding hierarchies” and “decentralizing” them.

The eternal cycle

In the past, there have been repeated downward shifts in competencies in the German economy. But they were seldom sustainable. Long-term employees usually feel like they are in an eternal cycle, which an old Chinese proverb describes as follows: “Centralization leads to resistance, resistance leads to decentralization, decentralization leads to chaos, chaos leads to centralization.”

You have been able to study this cycle well over the past few decades at Allianz, for example. Until 2003, Henning Schulte-Noelle ruled the company with an iron hand from above. His successor Michael Diekmann gave the operational units more freedom until 2015, so that Allianz Deutschland AG in particular could develop into a state within a state. What today’s Allianz boss Oliver Bäte was no longer willing to tolerate after taking office. Today, the Munich headquarters are once again setting the tone for the entire group, as they did under Schulte-Noelle. You can therefore work out what your successor should do: decentralize!

Actually, there is a lot more technologically speaking in favor of centralization than the opposite. The digitization of all business models and business processes makes many things possible that were simply impossible 20 years ago. Back then it was impossible for corporate headquarters to keep track of business units around the world. One steered with monthly reports, which often reached the corporate headquarters with a considerable delay. Today, data from the cloud from all over the world flows together in real time and quick decisions from above are much easier than before. And a lot of business can be done on the same digital platforms everywhere. Just think of Amazon: Hardly any other group works so centralized and at the same time so close to the customer as the retail giant.


Bernd Ziesemer is a capital columnist. The business journalist was editor-in-chief of the Handelsblatt from 2002 to 2010. He was then managing director of the corporate publishing division of the Hoffmann und Campe publishing house until 2014. Ziesemer’s column appears regularly on Personal-Financial.com. You can follow him on Twitter here.


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