Beginning with a symptom (such as dissatisfied clients or unhappy employees), you can "drill down" through a series of successively more specific symptoms until you find a suspected root cause -- a systemic dysfunction in the organization. This expert system is focused entirely on organizational issues, not on individual performance problems. It is based on the following premise:

If an organization is not well designed, good people will appear to be poor performers; and firing them will only bring in a new batch of good people who will also perform poorly because of the unhealthy organizational environment around them. The most important job of an executive is to design an organization in which everyone can succeed.

Decentralization
Executives are faced with tough decisions every day. Business decisions can determine the success of entire ventures. But organizational decisions are even more far reaching. They determine the ability of a corporation to succeed at every venture it undertakes, forevermore.

One of the most fundamental organizational decisions centers on the question of decentralization. Should a corporation comprise a number of relatively independent business units, each including most of the functions it needs to operate? Or should a corporation centralize the various service functions, betting on teamwork and cooperation to gain corporate synergies? In a nutshell, is a corporation one company or many?

Dean states two of his biases up front:

First, leaders have a responsibility to make these decisions thoughtfully. Such critical decisions must not be left to the vageries of opinions and political interplay. Too many careers and too much money are at stake. Effective leaders study the fundamentals of organizational design before making such significant choices.

Second, leaders should do whatever it takes to maximize the long-term health of the corporation. Quick fixes don't work, and a series of knee-jerk reactions to the issues of the day is unprofitable. Furthermore, subjecting people to a never-ending stream of organizational experiments is cruel. Effective leaders build a vision of the ideal, and implement it methodically, taking whatever time is needed to get things right.

This research provides a systematic analysis of the pros and cons of decentralization. It combines well-grounded theory with practical suggestions for consolidating functions without building bureaucracies, and for coordinating functions that are decentralized. I hope it will give executives the tools they need to build corporations that prosper not by the force of their own judgments and personalities, but as fundamentally healthy organizations that can succeed -- with or without them.

Outsourcing
Many organizations are interested in outsourcing -- that is, paying other firms to perform all or part of their work. In some cases, interest originates with top executives who use outsourcing as a threat to force change. Outsourcing vendors have promised dramatic savings, along with enhanced flexibility and the vision that line executives will have more time to focus on their core businesses.While on the surface these claims seem plausible, they do not hold up well under scrutiny.

Claims versus Reality
Consider the following claimed benefits of outsourcing and the reality underlying each:

Reduced costs Claim: Economies of scale will reduce costs. Reality: The outsourcing vendor must earn a profit at the customer's expense. Furthermore, external contracting brings added sales and transactions costs. The only lasting cost savings occur where there are true economies of scale across corporate boundaries.

One common example is long-distance telecommunications. There are other cases where inter-organizational sharing is possible, but such cases must be examined carefully. For example in I.S., hardware no longer shows economies of scale, and many software licenses are corporation specific.

Structural Cybernetics
Many people doubt the importance of structure because many reorganizations have done little more than "rearrange the deck chairs on the Titanic." Instead, they depend on selecting the right people. Of course, exceptional people can overcome most structural problems... if they work hard enough at it. But this is costly and risky.

Good people in a poorly designed organizational structure fail, while average people in a healthy organization succeed. The right solution is to fix the root cause -- that is, design an organization that directs people's energies toward performance, not overcoming built-in hurdles.

Internal Economy
An internal market economy involves the careful design and implementation of: chargeback systems, budgeting procedures, and project priority-setting and approval processes. An internal market economy delivers powerful benefits: