Boards are pulling decisions back to headquarters just as the environment gets noisier. Supply shocks swing quarterly plans, AI rewrites workflows, and many firms are preoccupied with attendance rules. Meanwhile, the people meant to translate strategy into action are running out of steam: only 22% of managers report being engaged in 2025, down from 27% a year earlier, and manager engagement has fallen nine points since 2022 (Gallup, 2025). If attention is scarce at the center, who should decide? The strongest field evidence says this: when turbulence rises, push decisions closer to the work.
What decentralization delivers in rough markets
Aghion, Bloom, Lucking, Sadun and Van Reenen examined how firms that had already delegated more authority to local plant managers fared during the Great Recession. Using two large micro datasets, the World Management Survey across ten OECD countries and the U.S. Census Bureau’s Management and Organizational Practices Survey, they found that firms that decentralized before the crisis outperformed centralized peers in the sectors hardest hit (Aghion et al., 2021). The analysis is quasi-experimental, based on difference-in-differences comparisons, not a randomized trial. Even so, the patterns are consistent and robust across datasets.
The mechanism matters. Decentralized firms benefited because local information was more valuable when markets were volatile. The authors operationalized turbulence using product churn and stock market volatility, and the decentralization advantage lined up with these measures (Aghion et al., 2021). In other words, when conditions change fast, headquarters is too far from the signal. The study also ruled out simpler stories, such as managers acting out of bankruptcy fear or easy coordination gains. The edge came from local knowledge applied quickly.
That finding should anchor how leaders read the current decade. If the environment looks more like 2008 than 1998, then the structure that worked in steady times will underperform. Delegating decisions is not a culture play. It is an information-processing choice under uncertainty, one that the crisis data reward.
Structure beats slogans
Decentralizing does not require abolishing hierarchy entirely, but the research on self-managing organizations clarifies the direction of travel. Lee and Edmondson define self-managing organizations as those that decentralize authority in a radical, formal, and systematic way across the enterprise, eliminating the classic manager-subordinate relationship (Lee and Edmondson, 2017). Their review synthesizes decades of management scholarship: managerial hierarchy is good at reliable execution of known tasks in stable contexts. It tends to choke nonroutine, cross-functional problem-solving, tilt toward rigidity, and reinforce status differences that stunt development.
The authors are clear on limits. This is a theoretical synthesis, not an experimental test of firm performance, and the empirical base on fully self-managing firms remains thin (Lee and Edmondson, 2017). The practical read is to borrow the design logic without handcuffing yourself to an ideology. Clarify which decisions truly demand top-down integration, then push the rest to the edge with explicit decision rights, service standards for support functions, and escalation thresholds. This is not about charismatic empowerment speeches. It is process.
Safety is the operating system for distributed judgment
Handing out autonomy without the social conditions to use it will waste time and credibility. Edmondson’s seminal field study of 51 manufacturing teams introduced team psychological safety as a shared belief that the team is safe for interpersonal risk-taking. Teams with higher psychological safety engaged in more learning behaviors, such as asking for help and admitting errors, and those learning behaviors mediated the link to performance (Edmondson, 1999). The study is cross-sectional and set in a single company, so it does not establish causation the way a randomized design would. The practical insight is still decisive. If people fear the consequences of calling a bad assumption or proposing a local workaround, delegation stalls.
For leaders, psychological safety is not soft. It is the precondition for real-time error correction at the edge. That is the loop Aghion and colleagues described in the macro data: local information becomes valuable only if someone is willing to surface it quickly and act. Without safety, distributed decision-making becomes distributed silence.
Redefining the manager in a flat reality
The engagement picture should also change how firms assign decision roles. Global employee engagement fell to 20% in 2025, and managers are central to that slide. Only 22% of managers report being engaged, down from 27% the year before. In the best-practice organizations Gallup tracks, 79% of managers are engaged, compared with the global average of 22% (Gallup, 2025). These are survey findings, not causal estimates, but the gap suggests engagement is largely a design issue, not destiny.
If you want more decisions made well and fast at the edge, stop casting managers as permission bottlenecks. Redesign the role as coach, problem-framing partner, and steward of interfaces. Concretely: publish a decision-rights map that names who decides, who is consulted, and who must be informed for the top workflows. Set clear local KPIs that align with enterprise goals, then give teams authority to change methods within ethical and regulatory constraints. Define two explicit escalation lanes, one for irreversible or systemic risks and one for resource conflicts, with service-level commitments from corporate functions. Pair these mechanics with team routines that cultivate safety, such as regular debriefs that prize candor over blame (Edmondson, 1999). The aim is to shrink decision latency without creating strategic drift.
The playbook is simple to start. Pick one product or plant in a volatile market. Measure decision cycle time end to end, from issue identification to irreversible commitment. Delegate three recurring decisions to the local team, document the boundaries, and have headquarters commit in writing to response times on escalations. Track outcomes weekly. The crisis-era evidence says the chances of outperformance rise when the edge can act on what it knows first (Aghion et al., 2021). The organizational scholarship says the odds improve further when the social climate supports speaking up (Edmondson, 1999). And the engagement data warn that the middle layer will not carry this shift on depleted reserves, which is why the role must change, not just the rhetoric (Gallup, 2025; Lee and Edmondson, 2017).
The broader implication is blunt. Centralized control feels safe in noisy times, but it is often the riskier bet. Turbulence rewards firms that treat decision-making as a distributed capability built on clear structure and psychological safety, not on heroic managers. Start by moving one critical choice closer to the work and hold the center to account for enabling it. In a world of fast signals, advantage flows to the teams that can hear and act first.
Sources
- Aghion, Bloom, Lucking, Sadun and Van Reenen (2021). Turbulence, Firm Decentralization, and Growth in Bad Times. Firms that delegated more to local managers before the Great Recession outperformed centralized peers in hard-hit sectors, with the advantage tied to the value of local information under volatility. https://www.aeaweb.org/articles?id=10.1257%2Fapp.20180752
- Lee and Edmondson (2017). Self-managing organizations: Exploring the limits of less-hierarchical organizing. Defines SMOs and synthesizes evidence that hierarchy fits stable execution but inhibits complex problem-solving, clarifying design choices and limits to radical decentralization. https://static1.squarespace.com/static/5b3cd0cb1137a6d4c0c877c9/t/5c919b0afa0d60694eebc96b/1553046287400/Final+ROB.pdf
- Edmondson (1999). Psychological Safety and Learning Behavior in Work Teams. In a field study, team psychological safety was associated with learning behaviors that mediated better performance, highlighting a social precondition for effective delegation. https://journals.sagepub.com/doi/10.2307/2666999
- Gallup (2025). State of the Global Workplace 2025. Reports global engagement at 20%, a sharp drop in manager engagement to 22% and a large gap with best-practice organizations, underscoring the need to redesign managerial roles. https://www.gallup.com/workplace/659610/state-global-workplace.aspx