Comments on: Cost of Centralization http://www.coyoteblog.com/coyote_blog/2007/02/cost_of_central.html Dispatches from a Small Business Sun, 12 Feb 2012 09:39:47 +0000 hourly 1 http://wordpress.org/?v=3.2.1 By: Matt http://www.coyoteblog.com/coyote_blog/2007/02/cost_of_central.html/comment-page-1#comment-4865 Matt Mon, 05 Mar 2007 10:09:51 +0000 http://coyote-blog.com/wordpress/2007/02/cost_of_central.html#comment-4865 <p>Actually, the truth is that I'm often amazed, based on your descriptions, that your business is even one business at all, since the natural (to me, anyway) choice, given the nature of your operations, would be to decentralize as much as humanly possible...especially since (as you've explained at length in some of the best practical real-world anti-government blogging I've ever read) each campsite your company operates carries with it a completely different set of bureaucratic and regulatory burdens. I know that I for one would never establish a tax or employment nexus in even a single other state until I was so big I'd all but cornered the market in my home state.,..just not worth the hassle.</p> <p>But your philosophy here makes sense...centralize where it demonstrably makes sense to centralize, otherwise delegate to the guys on the ground...and be skeptical about any apparent benefits to centralization, since there are often hidden costs more than sufficient to counteract them.</p> <p>I've never understood the centralization mania, except as an effect of the agency paradox. The cost savings are never large enough to justify the risk (and in some cases the certainty) that the central authority's bad decisions will have a negative impact on productivity in the field. Sounds like your centralized purchasing scheme fell victim to that malady.</p> Actually, the truth is that I’m often amazed, based on your descriptions, that your business is even one business at all, since the natural (to me, anyway) choice, given the nature of your operations, would be to decentralize as much as humanly possible…especially since (as you’ve explained at length in some of the best practical real-world anti-government blogging I’ve ever read) each campsite your company operates carries with it a completely different set of bureaucratic and regulatory burdens. I know that I for one would never establish a tax or employment nexus in even a single other state until I was so big I’d all but cornered the market in my home state.,..just not worth the hassle.

But your philosophy here makes sense…centralize where it demonstrably makes sense to centralize, otherwise delegate to the guys on the ground…and be skeptical about any apparent benefits to centralization, since there are often hidden costs more than sufficient to counteract them.

I’ve never understood the centralization mania, except as an effect of the agency paradox. The cost savings are never large enough to justify the risk (and in some cases the certainty) that the central authority’s bad decisions will have a negative impact on productivity in the field. Sounds like your centralized purchasing scheme fell victim to that malady.

]]> By: TJIC http://www.coyoteblog.com/coyote_blog/2007/02/cost_of_central.html/comment-page-1#comment-4864 TJIC Tue, 27 Feb 2007 17:39:53 +0000 http://coyote-blog.com/wordpress/2007/02/cost_of_central.html#comment-4864 <p>Fascinating stuff; please keep up the small-business blogging!</p> Fascinating stuff; please keep up the small-business blogging!

]]> By: Doug http://www.coyoteblog.com/coyote_blog/2007/02/cost_of_central.html/comment-page-1#comment-4863 Doug Fri, 23 Feb 2007 18:29:06 +0000 http://coyote-blog.com/wordpress/2007/02/cost_of_central.html#comment-4863 <p>I've found that efficiency is confused with effectiveness almost as often as correlation is with causation.</p> <p>You are fortunate your company isn't public. I've watched a company that operated much the way you describe with phenomenal results. Then it went public but resisted the lure of efficiency and performance stayed pretty consistent. Then along came SOX, which practically criminalizes decentralization and the effects have been obvious.</p> I’ve found that efficiency is confused with effectiveness almost as often as correlation is with causation.

You are fortunate your company isn’t public. I’ve watched a company that operated much the way you describe with phenomenal results. Then it went public but resisted the lure of efficiency and performance stayed pretty consistent. Then along came SOX, which practically criminalizes decentralization and the effects have been obvious.

]]> By: h http://www.coyoteblog.com/coyote_blog/2007/02/cost_of_central.html/comment-page-1#comment-4862 h Fri, 23 Feb 2007 16:42:06 +0000 http://coyote-blog.com/wordpress/2007/02/cost_of_central.html#comment-4862 <p>The latest Forbes magazine has a profile of Mark Hurd's work at HP and he talks about the exact same stuff. Give your managers accountability and centralize very little</p> <p>-h</p> The latest Forbes magazine has a profile of Mark Hurd’s work at HP and he talks about the exact same stuff. Give your managers accountability and centralize very little

-h

]]> By: TCO http://www.coyoteblog.com/coyote_blog/2007/02/cost_of_central.html/comment-page-1#comment-4861 TCO Fri, 23 Feb 2007 02:50:15 +0000 http://coyote-blog.com/wordpress/2007/02/cost_of_central.html#comment-4861 <p>Amazing how people at the Firm, don't think of these types of things. You don't have to actually run a small business to consider these types of tradeoffs. But they would always assume that you could have cake and eat it too. Or have cake and "manage away" the tradeoff.</p> Amazing how people at the Firm, don’t think of these types of things. You don’t have to actually run a small business to consider these types of tradeoffs. But they would always assume that you could have cake and eat it too. Or have cake and “manage away” the tradeoff.

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