MUMBAI: When the PMO said Narendra Modi will have a final say on policy matters, it clearly set the tone for a centralized structure of operation in the new government. Some companies decentralize their structures to cut down on bureaucracy and enhance creativity. However, given the context of the Indian economy and Modi's personal style of functioning, management gurus TOI spoke to believe a centralized structure of governance would work best for India.
In a centralized structure, a leader has a strong control over decision making, while in a decentralized structure, managers down the hierarchy are empowered to take decisions. In larger multinationals, the operations are generally decentralized across geographies. "What India needs now, more than ever, is centralized decision making in setting fiscal, monetary, and regulatory policies but decentralized decision making with regard to creating new businesses and getting the economy going," said Vijay Govindarajan, Coxe Distinguished Professor at Tuck, Dartmouth.
But there is a difference. Experts are hopeful the Modi government would not micro-manage all economic activities. Prior to 1990, India followed centralization to a fault where the government was running steel mills and power plants. "The government should do what is supposed to do - govern and let the Indians do what they know how to do well — fuel entrepreneurship," said Govindarajan.
The previous government, which followed a decentralized structure, was criticized for its policy paralysis. There are specific reasons why companies adopt either of the two structures. "Whether it is a centralized structure or decentralized, one cannot make a virtue out of the two management styles. Both have their value and relevance depending on two things; one, the context in which the leader operates, which includes the task at hand (which in corporate sector is described as strategy) and the ecosystem; and the second, the personal style of the leader," said Santrupt Misra, director, HR, Aditya Birla Group.
The context in India's case is certainly challenging. As for the personal style of the leader, Govindarajan said Modi's leadership style is perfect for the times and India needs a strong leader "who is not afraid of making the tough decisions".
"We are transiting from a lax government with no decisive actions and corruption. A decentralized decision making in this context will be disaster," said Bala V Balachandran, J L Kellogg distinguished professor (emeritus in service) of accounting and information management, Northwestern University.
Misra said it's important to keep in mind what structure would be a natural fit to the leader's personality. If the personal style of the leader is one of centralized, then to think that he or she will operate in a decentralized structure is like going against the natural grain of the leader.
A centralized structure would also mean that accountability lies with the leader alone. "The people of India trusted Modi as a decisive leader with accountability and responsibility. The buck stops here.
If things go right then, knowing him personally, I am confident he will distribute the results to his cabinet and the IAS officers. If it goes wrong, there is only one man to take the entire blame," said Balachandran.
A centralized structure is seen to be useful when there are quick wins to be achieved.
"However, the band width availability of the centralized structure where volumes of information to be processed for decision making is an issue. The advisers who form part of the centralized structure have to be extremely sharp and objective for this to work well," said P Thiruvengadam, leader and senior director, Deloitte Human Capital Advisory Services.
A single centre of power can also scuttle creativity. Govindarajan said every Indian should be empowered and encouraged to innovate. "India's youth is our single biggest asset. The window of opportunity to leverage this asset is rather limited, may be 20 years. If we do not do that, our demographic dividend will become a demographic disaster," said Govindarajan
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