Centralization is often marketed as a method to reduce waste and therefore a cost-cutting solution. This is almost never the case. The most effective way to cut waste is to follow Lean principles.
However, centralization often goes against lean principles because it introduces inefficiencies, reduces flexibility, and can create bottlenecks in decision-making and resource allocation. Here’s a breakdown of why centralization clashes with lean principles:
1. Slower Decision-Making
Centralized structures require decisions to pass through a hierarchy, which delays responses to issues or opportunities.
Lean principles emphasize speed and empowerment, enabling teams to make decisions quickly at the point of impact.
2. Reduced Empowerment
Centralization takes decision-making power away from the people closest to the work (e.g., frontline workers or teams).
Lean encourages empowering individuals and teams to identify and solve problems, fostering a culture of ownership and accountability.
3. Lack of Flexibility
Centralized systems are less adaptable to changes because adjustments require higher-level approvals or broader consensus.
Lean thrives on agility and the ability to pivot quickly to meet customer needs or address inefficiencies.
4. Creates Bottlenecks
A centralized approach can lead to bottlenecks when too much authority or responsibility is concentrated in a small group of decision-makers.
Lean focuses on flow efficiency, ensuring processes run smoothly without unnecessary delays.
5. Discourages Continuous Improvement
Centralized systems often discourage the small, incremental improvements that are central to lean thinking.
Lean promotes a culture of Kaizen (continuous improvement), which relies on input and experimentation at all levels.
6. Disconnect from the Gemba
In a centralized system, decision-makers are often far removed from the Gemba (the place where value is created, e.g., the production floor or service delivery point).
Lean principles stress going to the Gemba to understand the real issues and make informed decisions.
Conclusion
Lean principles prioritize decentralization, emphasizing team autonomy, faster decision-making, and a focus on continuous improvement. By distributing authority, lean organizations can better align processes with customer value and adapt to changing needs efficiently.