Most large companies, at some point, consider centralisation and a lot of companies go through the process, a significant number then go on to decentralise which makes the whole process very expensive!
One particular company has 10 depots and they decided to centralise, the systems they installed centrally were superb and state of the art but when they turned to closing down their overhead out in the field they found it would effectively close down their business. This meant the company had created a whole new overhead for the company, even bigger than the existing overhead.
The answer was easy, admit the decision to centralise was wrong, make the focus of the company the depots and tranfer the technology installed at the centre to the depots. Add to this a small head office of MD, FD, SD, Personnel and admin and the company is immediately in profit, empower the depot managers to manage the businesses they understand and the company will thrive.
But in reality the company did both, they put all their credibility behind centralisation and at the same time committed to never closing a depot which effectively meant overheads of 3 times their competitors and losses of £1m per year.
Pride and the inability to admit a mistake means as far as this company is concerned it is past midnight.
A simple lesson if you are considering centralisation, always ask if I introduce new overheads centrally what will happen if I then compensate by closing existing overheads, if the answer is you will lose business then probably you are not a candidate for centralisation
The Author runs the following sites:
www.channelshopping.co.uk and www.mastertheinternet.co.uk
Filed under: Business
