“If we bring all the similar groups together under one roof, think of the duplication we will avoid and the costs we will save,” so the saying goes. Thus, at first glance centralizing many like services under one umbrella should be a solution suggested by plain logic, if not ordained by Heaven itself. But beware; there is much more to the story than the surface appearance. We will, in this paper for the most part, argue against centralization and opt for ‘organized confusion’ instead. Let’s see why.
- When it pays to Centralize
Economy of scale makes it beneficial to centralize. If a purchasing body of a large company can buy a monthly supply of copy paper from a single source, for all the company’s divisions, the likelihood of negotiating a much lower price is clearly available compared with each division of the company procuring its own paper from its own supplier. Therefore, it is wise to centralize this part of purchasing.
Meeting the needs of a critical or emergency system or program suggests the preference of a centralized approach such as, for example, deciding on the accounting system to be employed by a company of many divisions. Or it might be a telephone or an inventory control system. You need all the divisions to be able to talk to one another and to work with one another seamlessly. Centralized systems make that work well; decentralized can lead to confusion and poor interdivisional communications. Of course this is even more apparent with the military forces. A country needs one military system to defend itself, not an arrangement of competing militia.
- Centralization gone awry
Before us lie many examples of centralized systems that seemed wise at the outset, a way of combing services and costs, but after the dust settled, there was no improvement in services nor in costs. In fact just the opposite seems to have occurred. It seems to have occurred because it really has happened: services have gone down while costs have gone up (we will show, in section 6 below, why this MUST be the result).
An obvious example is the Russian Communist system – centralized planning, centralized commerce, centralized farming, centralized housing and centralized government. Every one of these top-down planned activities ended in disaster with the ultimate consequence of the citizenry rejecting the highly controlled system for a more democratic and more distributed approach.
Closer to home, we have recently formed centralized cities where the wise thinkers of the day believed one geographic collection of people should be governed by one mega-city rather than a conglomeration of municipalities. In Ottawa for example, the millions of savings by eliminating Kanata, Nepean etc. as separate governing entities have now turned into millions of extra costs. People complain that services have gone down, not up.
How about combining all the hospitals in a region for a centralized hospital system? Same results: no cost savings, no improvement in services, to be charitable. However, only you, as someone living under such change, would be able to answer whether this amalgamation has resulted in savings and service improvements or a demand for more budgets and a decline in services in your geographic area.
Twenty years ago I attended a conference in a Communist country of Eastern Europe. We were not allowed to book our own rooms as would happen elsewhere in the world but instead the centralized housing bureau would take care of it. By the time the conference date arrived, bookings had still not been completed. We arrived from overseas, tired and ready for a room. Instead we had to go to the central booking office, now filled with hundreds of exhausted, angry, impatient and disbelieving Western business people. We waited about 6 hours in that humongous but crowded room till we were assigned our accommodation. (The size of that room suggested that this last minute crowding was a frequent occurrence.) There was no choice about suites or apartments, no discussion and certainly no give and take. Instead we ended up in a university dormitory – not exactly what we would have chosen on our own or what we would expect after a six-hour wait intended to provide a careful selection.
- Create your own Centralized System
To illustrate a centralized approach that you might be responsible for, consider the situation of getting to work each morning. Presently people in your city are responsible for finding their ways to work on their own. Most drive, some take buses, some walk, some cycle, etc. The options are numerous. In this present system most people arrive at the office or factory most mornings on time. It seems to work. Of course it is expensive: thousands of cars when perhaps only half of them would be needed if we had centralized planning. Now you enter with a mandate to create an all-encompassing get-to-work operating system for the entire city. You are given control of all the cars, buses and bicycles in the city and you are in charge of assigning who will travel in what – and when – each morning. People are mandated to follow your plans. Do I have to go any further? Most minds will grasp the enormity of the challenge – and the impracticability of it.
Why is it intuitively ridiculous to centralize this planning of early morning transportation and not other systems? It is just as impossible to effectively arrange this sort of centralization as most others for exactly the same reasons. Let’s see what they are.
4. Why Centralized Planning of the “Get-to-Work” System Fails
Three obvious shortcomings of the centralized traffic system above are:
- Removal of Choice
- Removal of Flexibility
- Removal of Adaptability
Removal of Choice
People like to choose. They like to have options but more important, people like to feel they have control over their own affairs and choices of how to address those situations. Take away the ability to control and you take away a fundamental human behavioral driver. Sometime people understand that they may not be able to control very complex situations such as which aircraft will carry them to the next city but they want to choose the airline itself as well as the date of travel. People certainly want to control simple situations, such as finding their ways to work each morning.
Removal of Flexibility
One morning I may want to drive to work and another I may walk, depending on the time available, or my mood and a myriad of other factors. I like to be able to exercise that flexibility. Most people do. A centralized system takes away that option. How can centralization function if the thousands of people it is trying to serve want flexibility regarding the travel path assigned to them? How do you communicate those desires, even if flexibility were permitted – which it never is?
Removal of Adaptability
Suddenly an emergency meeting is called, not at your office but at 8:30 am, your usual starting time, at a client’s office. You need to be able to adapt to this change of your routine. But the centralized planning has only one vehicle available to you and it is going to your office for an 8:30 arrival. Besides, even if you were allowed to go to the client office, all the vehicles going there at 8:30 are already full – as centralized efficiency mandates.
Realize, the underlying reason for centralized planning of this traffic management system – that of saving you costs – is not of value for you, even at $30 per week. The inconvenience of loss of choice, flexibility and adaptability for getting to work is rarely worth the saving. In fact it is even worse than that: the true result is no savings at all; costs must, in fact, go up, not down (see section 6).
- Four Underlying Reasons
Four reasons that explain why most centralization efforts fail to work are:
(1) All functioning systems thrive if they can respond to change. They fail if they are not responsive to change. Failure is that simple to explain. To be responsive to change, the systems must have continuous measurement and feedback systems that react to new information. You steer your car based on information (visual) that measures where you are, your approximate speed and allows you to respond to changes in the road situation. Centralized systems by their very nature take away that functionality; they take away choice, flexibility and adaptability. They usually fail to measure based on the success of whom they are serving (our definition of effectiveness), which is usually sacrificed to the Goddess of efficiency. (Please see reference  for definitions of efficiency and effectiveness.) Instead most centralized plans measure success based on values of the planners rather than clients’ needs  .
(2) Those who appreciate chaos theory realize that it pits the wisdom of the masses rather than the few to end up with elegant and complete solutions. To some it is called ‘organized confusion’. The masses left to their own devices can plan how to get to work each day, whereas centralized top-down planning cannot. Let us illustrate nature’s chaos at work with a quote from the CCCC note on the harvester ant colony’s ‘organized confusion’:
“Recent studies of harvester ant colonies show there is no head organizer. The queen ant is not a leader; she is a baby factory – that’s it. The remaining ants – all female – either harvest or build. The male flies in one day of the year, deposits his seeds with queenie and dies. The poor chap is not even equipped with jaws, as he does not live long enough to get hungry. Since there is no leader, how do harvester ants go about their duties adjusting to the variables around them? They know how to compute the shortest distance to a food source, how to locate the ant cemetery away from their garbage heap and the preferred distance away from the anthill for refuse, how to prioritize food sources based on distance from the nest and ease of access, how to switch worker ants from nest building to foraging – all in response to the external conditions. That is, they engage in improvised problem solving. With minimal cognitive skills, and no one in charge, they respond globally to the needs of the nest. It is this skill of thinking locally, acting locally but with their collective actions producing global behavior that arouses scientific curiosity – just like the slime mold and just like our human cells that manage to work so well together.”
(Chaos theory – acting locally to get ideal global results – is expounded upon in CCCC Newsletters of January 2005 and February 2005, references  and .)
(3) Human nature works against centralized planning unless the benefits of that planning are obvious to the participants. Why? Let us refer to the CCCC Newsletter of July 2005, reference , which is reinforced in a book series :
“All of us have a basic need to be ‘origins’ in our lives rather than ‘pawns’. It’s important to experience a sense of autonomy, a feeling that we are the initiators of much of what we do. In fact, the particular choices we make are often less significant than the act of choosing itself.
This need for autonomy in our decision-making begins in infancy and is a pillar of Alfie Kohn’s message for Unconditional Parenting , an insightful means to assist your children to become responsible, productive and happy adults.
However, most children are not so fortunate as to be exposed to Mr. Kohn’s philosophies and methods. Instead the workplace is made up of mostly disadvantaged adults who have been subjected to all forms of disrespect all their lives.”
The disrespect often manifests itself in the form of lack of choices. These imposed choices come from parents, siblings, teachers, schoolyard bullies, coaches, military commanders, supervisors and bosses. While most adults understand and appreciate the need for freedom of choice, most do not experience it much of the time and most do not apply it much of the time. As a result, most people have no idea of the power that managing, by allowing private choices, offers its adherents.
(4) Centralized planning confers on the controllers and planners an inner lust for power. This may be due to their own inadequacies, their need for control or their egotistical sense that they know better than others what is good for them. That egotists and inadequate people thrive side-by-side in centralized planning posts is a dichotomy that psychologists must have fun explaining.
6. Costs Must Escalate
Costs must escalate when centralization is applied for exactly the four reasons listed in the above section, namely:
(1) Respond to Change
If a system is unable to respond to change, it will keep on doing what it has been doing even though that activity will, by now, be inutile. Spending money on unused or useless activities leads, obviously, to waste – lots of it. And it prompts allocating more expenses to make up for the apparently poorer results.
(2) Chaos Theory
Mother Nature figured out long ago that the shortest route to a desired, elegant and responsive conclusion was through the chaos theory track (‘chaos’ is the human being’s name for it, not Mother Nature’s). It is the means by which leaves and trees are formed, babies evolve, quantum mechanics behaves (and ant colonies organize). The shortest route – the one created by the chaos approach – is usually the cheapest one. CCCC verifies this economy every day as it continues to solve hundreds of client problems applying chaos theory techniques; they lead to solutions within hours or days that had previously failed when applying ‘planned’ techniques, despite often engaging years of effort .
(3) Human Nature
It is simple human nature to want to be able to choose. When a top-down system imposes choices it is also becomes human nature to resist, which it does by ‘bucking the system’. Thus, deviously crafted, little routes around the systems are developed by hundreds, if not millions, of people. At the very least, we have the expense of two systems concurrently in play. Costs, therefore, must rise. What else is possible?
(4) Lust for Power
People who lust for power are concerned about one thing only, the power and control. They are deaf to others’ ideas and needs and will rationalize their actions regardless of the costs – because all that matters is retention of power. In fact the more resistance the masses offer, the more money such leaders will waste to keep control of the situation. Unfortunately, even individuals who are not consciously trying to manipulate will be tempted to spend money to maintain control or to apply funds to convince people that this controlled system is good for them. Indubitable results: increased costs.
(1)+(2)+(3)+(4) add up to increasing costs. There is no room for exceptions. Even if only one of the above applied, costs would rise – but most of the time, all four apply. Heaven help the public as the well-meaning mayors, politicians and management consultants attempt to explain away the obvious escalations of costs after the civic mergers  with their obfuscations.
Since centralization increases costs, centralization should only be applied when it is determined that the predictable increase in costs will benefit the group or organization in other ways such as via improved communications or avoidance of disaster if not centralized. Otherwise – and therefore in most situations – we recommend that the bottom-up, decentralized or chaos-theory-based systems be applied.
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We wish you the best for the holiday season and hope that you pursue your endeavours chaotically.