Decentralized Operating Models Will Always Win the Day Over Centralized Counterparts

Decentralized Operating Models Will Always Win the Day Over Centralized Counterparts

Yesterday Expedia (ticker: EXPE) announced that its CEO and CFO had resigned effective immediately. The reason? A disagreement in strategy with Chairman Barry Diller. Expedia’s former CEO and CFO had pursued a corporate reorganization to “streamline operations” to “drive innovation at scale.” Our observation – certainly insofar as the Technology industry is concerned – is that centralized operating models simply do not work. Expedia is the latest example. Centralized operating models remove decision-making authority and accountability from business leaders who have deep domain expertise. Who suffers in the end? The business suffers – employees, customers, shareholders and ultimately executive management. Our guess is that Chairman Barry Diller will return Expedia to a decentralized operating model where the various business unit heads will have real decision-making power, will be held accountable and will see changes in their respective compensation plans with an emphasis on variable components.

We previously covered this topic in our article entitled: Centralized Operating Models Don’t Work. Even for The Narcissist CEO.”

For those who may be interested, Nuance (ticker: NUAN), moved to a centralized operating model approximately one year ago. Time will tell how that story plays out.



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