Decentralization with Co-ordinated Control
Th concept of decentralization with co-ordinated Control was proposed and explained by Alfred Sloan in his book "My Years with General Motors."
He said for people responsible for business unit performance, two important critical factors for success were motivation and opportunity. Motivation is provided in good part by incentive compensation. Opportunity is provided by decentralization.
In a corporate organization, there has to be decentralization which gives business units managers the opportunity take decision close to the facts, but there has to be mechanisms that ensure that corporate values and policies are adhered to and synergy between the various business units is enhanced. The synergy that we are referring to is the efficiencies and economies that arise out of the corporate set up.
At General Motors, the organizatioin evolved over a period of time, and a over period system of flow operating data from business units to corporate head quaters was set up and according to Sloan, it made real co-ordination possible to a large extent.
According to Sloan, the economies that flow from central-office activities are considerable while the cost of central office on the average comes to less than 1 per cent of the corporation's net sales. He strongly emphasized that the corporate staff contributions in the fields of styling, finance, technical research,advanced engineering, personnel and labor relations, legal affairs, manufacturing, and distribution are outstanding adn certainly worth a large multiple of their cost.
Alfred P.Sloan, Jr., My Years with General Motors, Published by Pearl Publications Limited, Bombay 1969. Published in arrangement with Doubeday & Company, Inc.