Devolution
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The "command and compliance" culture is giving way to the "trust and commitment" one...

In an article published in the February edition of "Financial Management", David Allen suggests that today, effective management means replacing a "command and compliance" organisation culture with one built on "trust and commitment" or "devolution".

Is this a new challenge or is it a 'flavour-of-the-month' fad? Could 'devolution' be one of the answers we are seeking or should it be filed in 'permanently-pending' to gather dust?

Is David Allen correct? He says;

"Traditionally, most large organisations have had a "command and compliance" management culture - all major decisions are made at the centre, at predetermined intervals. Generally, this was reinforced by a "once a year for a year" budget, expressed in the language of accounting.

Such an approach made a lot of sense in a stable environment, where the tactical level of control dominated. Success was seen to depend on how well an organisation did whatever it had chosen to do. But, as the rate of change has increased, centralisation has become inappropriate. Today, the strategic level is paramount, and success is seen to depend on the decision about what the organisation should do. Specifically, firms have to be able to adapt rapidly to meet customersí changing needs.

But therein lies a problem: centralised organisations are too slow on their feet and are losing business to their more nimble competitors. This has a lot to do with the fact that people at the centre of organisations rarely have any meaningful contact with customers."

and

"The main benefits cited by boards of directors announcing a shift in this direction (towards 'trust and commitment') are that it encourages enterprise, harnesses innovation and accelerates decision-making. In practice, it is usually accompanied by a cut in the number of people employed at the centre. But this approach makes it much easier for the enterprise to adapt to the environment.

Needless to say, such a change has enormous implications for the structure of the organisationís financial controls. The emphasis under the old regime was on checking that subordinates had done what they were told to do. Under the new regime, staff will not have detailed instructions - they will do what they believe to be right in the situation."

Read more about this culture change through the full text of this short article in the February 2001 edition of "Financial Management", a magazine published by the Chartered Institute of Management Accountants (CIMA). Write to financialmanagement@cimaglobal.com or visit http://www.cimaglobal.com.

Ron Wells  

 
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