Falling communication costs are enabling companies to decentralize their decision-making structures. Now they must seek a balance between empowerment and control.
Malone suggests that greater decentralization in business is a response to fundamental changes in the location of decision making; the changes are enabled by the dramatically decreasing costs of IT. A central issue for organizations in the twenty-first century, the author posits, will be how to balance top-down control with bottom-up empowerment. He proposes radically decentralized organizations such as the Internet as new models for organizing work.
Malone examines the three stages in the relationship between lowered communication costs and the economics of decision-making structures. When communication costs are high, decision makers are independent and decentralized; for example, people in tribes, villages, and towns. When costs fall, decision makers become centralized, as in large, global corporations. As costs fall further, connected, decentralized decision makers can combine the best information from anywhere with their own local knowledge, energy, and creativity. Malone uses the history of retailing as an example. Mom and pop stores with unconnected, decentralized decision making are replaced by Wal-Mart type stores with connected, decentralized decision making via electronic ordering and inventory systems. The Internet is an even more decentralized form of retailing in which anyone can establish a global sales operation.
The author sees three types of decision makers: cowboys, who are independent and decentralized and have low communication needs; commanders, who are centralized and, like military commanders, have high needs for communication; and cyber-cowboys, who are connected and decentralized and make independent decisions based on large amounts of information from electronic networks. Three IT-related factors determine where decision making in an organization occurs or is most desirable: (1) decision information — IT enables organizations to communicate information to people who have the knowledge, experience, and capabilities to make decisions; (2) trust — IT can increase trust by making remote decision makers more effective, controlling them, and socializing them; (3) motivation — IT enables people to make their own decisions about how to do their work. Autonomy makes them enjoy their work more.
In radically decentralized organizations, Malone sees power emanating from the bottom rather than from the top. Who makes the decisions and who can overrule decisions will become crucial issues. In a growing knowledge-based economy, empowered decision makers enabled by new IT will have increasingly important roles.