Executives reach for centralization when the ground shifts. They tighten approvals, pull choices to headquarters, and hope that control will substitute for clarity. The trouble is that the middle is already strained. Global employee engagement has slid to 20 percent, and manager engagement has fallen sharply since 2022, from 27 to 22 percent in a single year (Gallup, 2025). In this climate, more sign-offs do not fix confusion. They slow the work and drain what discretion remains. The better move in a storm is the scarier one: give decisions back to the edges.
What the evidence says about bad times
A large comparative study of firms during the Great Recession found a consistent pattern. Companies that had delegated more decision rights to local plant managers before the crisis performed better in the sectors that took the hardest hit, relative to more centralized peers facing the same shocks (Aghion et al., 2021). The authors drew on two substantial microdata sources, including the World Management Survey across ten OECD countries and the US Census Bureau’s Management and Organizational Practices Survey. The effect held under multiple tests and was robust to alternative explanations such as fear of bankruptcy or coordination changes (Aghion et al., 2021).
The mechanism matters. In turbulent conditions, local information becomes more valuable, and the cost of routing decisions through headquarters rises. The study’s turbulence measures, such as product churn and stock market volatility, align with this localist view. When demand is whipsawing or supply lines are shifting by the week, those closest to customers, suppliers, and machines see the pivots first. Delegation lets them act while the window is still open (Aghion et al., 2021). The research is quasi-experimental rather than a randomized trial, so we should avoid claiming deterministic causation. Even so, the weight of the evidence, methods, and replication data justify a clear managerial lesson for downturns.
Hierarchy is for certainty, not complexity
Hierarchy has strengths. It coordinates known work reliably when the environment is stable. It sets clear lines of control, which helps with compliance and repeatability. Yet the same properties that help execution in calm periods tend to impede problem solving across functions when the situation is novel or messy. A synthesis of the management literature concludes that traditional manager–subordinate structures often become rigid under complexity and reinforce status differences that hold people back from developing and contributing beyond their lane (Lee and Edmondson, 2017).
That review also defines the far end of the decentralization spectrum: self-managing organizations. These are firms that decentralize authority radically and systematically across the whole enterprise and remove the formal boss–subordinate relationship as a design choice (Lee and Edmondson, 2017). Few companies need to go that far to benefit from distributed decision-making. The point is not ideology. It is fit. When work is interdependent and the environment is shifting, pushing decisions closer to the work increases the chance that cross-boundary problems are solved by those who can see how the pieces actually connect.
The enabling condition: psychological safety
Authority on paper is not the same as real discretion. People will not take initiative if raising a risk invites blame or if admitting uncertainty is career-limiting. The construct of team psychological safety speaks directly to this barrier. In a field study of 51 teams in a manufacturing company, teams that reported higher psychological safety also reported more learning behaviors, such as asking for help, discussing mistakes, and experimenting. These learning behaviors, in turn, mediated the link between safety and performance in that context (Edmondson, 1999). The study is cross-sectional and set within one firm, so we should not overgeneralize. Still, it grounds a practical insight. Delegating decisions without creating conditions where questions and fast feedback are safe yields timid local choices and hidden errors.
Translate that into operating practice. If you want plant supervisors to re-sequence production in response to a supplier slip, or a regional team to adjust pricing after a competitor moves, you need two things. First, clear decision rights that specify what can be decided locally and what must be escalated. Second, a climate where surfacing trade-offs, constraints, and near-misses is treated as competence, not insubordination. Safety turns delegated authority into active learning rather than silent workarounds.
Why the middle matters now
The case for decentralization is not a vote against managers. It is a vote to change what managers do. The same Gallup report that shows engagement at 20 percent also reports that only 22 percent of managers are engaged on average, while 79 percent of managers in best-practice organizations are engaged (Gallup, 2025). That spread suggests design, not destiny. When managers are cast mainly as approval nodes, they become bottlenecks. When they act as context setters, coaches, and integrators, their leverage returns. Distributed decision-making makes this shift possible, because it moves routine choices down and asks managers to improve the quality of information, priorities, and interfaces.
How to start distributing decisions without losing coherence
The risk in decentralization is not anarchy. It is drift. You can avoid it with a few design moves:
- Map decisions by type and risk. Push high-frequency, reversible choices to the edge. Keep rare, high-impact, or cross-unit choices as shared or central. This mirrors the local information logic under turbulence identified by Aghion and colleagues (Aghion et al., 2021).
- Set guardrails in plain language. Define the metrics to protect, the thresholds that trigger escalation, and the spending or pricing bands that are truly local. Ambiguity pulls decisions back to the center.
- Make data visible. Local teams cannot act quickly if they must ask headquarters for the numbers. Transparency reduces the need for permission.
- Build psychological safety on purpose. Open meetings with uncertainty statements, run short after-action reviews, and praise intelligent risk-taking even when it does not pan out. The goal is to increase the learning behaviors that Edmondson linked to better outcomes in her field study (Edmondson, 1999).
- Redefine the managerial job. Hold managers accountable for the clarity of priorities, the quality of handoffs, and the health of learning norms, not for the volume of approvals. This aligns with the literature’s view of hierarchy’s limits in complex problem solving and the potential of less hierarchical designs when conditions demand it (Lee and Edmondson, 2017).
The practical implication is straightforward. In stable markets, centralization can look efficient. In volatile ones, it becomes slow and brittle. The strongest field evidence we have from a major downturn shows that firms that had already delegated fared better where shocks were most severe, because local information mattered more and fast action was rewarded (Aghion et al., 2021). Pair that structure with a climate that encourages candor and experimentation, and you raise the odds that people at the edge will see, decide, and adapt faster than a chain of approvals ever could.
Sources
- Aghion, Bloom, Lucking, Sadun and Van Reenen (2021). Turbulence, Firm Decentralization, and Growth in Bad Times. Firms that delegated more before the Great Recession outperformed centralized peers in the hardest-hit sectors, consistent with the value of local information under turbulence. https://www.aeaweb.org/articles?id=10.1257%2Fapp.20180752
- Lee and Edmondson (2017). Self-managing organizations: Exploring the limits of less-hierarchical organizing. A peer-reviewed synthesis showing hierarchy suits stable execution but constrains complex problem solving, and defining radical decentralization in self-managing organizations. https://www.sciencedirect.com/science/article/abs/pii/S0191308517300059
- Edmondson (1999). Psychological Safety and Learning Behavior in Work Teams. A field study linking team psychological safety to learning behaviors that mediate performance, underscoring the climate needed for distributed decisions to work. https://journals.sagepub.com/doi/10.2307/2666999
- Gallup (2025). State of the Global Workplace 2025. Reports global engagement at 20 percent and a sharp drop in manager engagement since 2022, highlighting the strain on the middle and the need to redesign roles. https://www.gallup.com/workplace/659610/state-global-workplace.aspx