Could decentralization save money on overhead?
By: Stephan Van Duin
Tags: Biology, Management And Leadership, Business, Inspiration, Management

Let’s take a look at squid, sapiens and flocks of starling

For ages, people worked as artisans in small workshops. As time went on and technology developed, aggregated workers became more standard. At some point during the Industrial revolution, companies started to get so large that management was needed. Communication was still slow, with the telegraph and telephone in its infancy, and companies needed to make sure that production and distribution was coordinated.

This idea of a layer of management that is needed to direct companies has only become more prevalent and dominant since. Managers now hoover up a large part of any company’s turnover, yet they don’t directly contribute to production. This is what is called overhead cost. But do we really need this? We might look at nature for a potential alternative…

A company as a human

Perhaps it isn’t strange that we rely on centralized governance in companies; look at how we humans are organized! We have a huge brain that dictates everything. It houses our thoughts, but also our senses and body coordination. It even moderates our hormonal wellbeing to a large extend. It also soaks up about a fifth of our energy, even though it only makes up a few percent of our body weight. The fact that this — literally — top-heavy way of doing things is exhausting, can be seen in the amount of burn-outs and mental diseases. We are overloading our brains to the point of exhaustion.

The same thing is happening to modern companies; management grows, while production is under stress because of limitations on natural resources or unrealistic expectations of growth to sustain this top-heavy organization.

Humans are now at the forefront of centralized governance — there is no animal that houses so much brain power, but also our largest companies are showing signs of exhaustion. Managers are unable to oversee it all, and it ruins workers as well as the environment. To be able to maintain manageability, the managers have to create shortcuts that keep things nice and simple. But this drive towards predictability of workers makes clones out of them. And that is not fair, since they are also humans with lots of brain capacity and organizational skills. How can we change this for the better?

(For more thoughts on overhead costs as a part of a company’s ‘metabolism’, read this story.)

Divide and conquer

The expression ‘divide and conquer’ was coined to describe successful military strategy in an empire. But it could work for management as well, if you read it a little differently: divide the work, and conquer. Let’s take a look at starlings. These smallish black birds come together in huge flocks or murmurations of up to tens of thousands of birds and create beautiful displays together. They swirl in the sky, so close together and changing direction all the time. They do this to prevent giving predators a chance. But do you think there is one bird making up all the movements, somehow communicating the winding course to all the others through middle management? Well, maybe you do — but you’d be wrong.

Ready to murmurate. Photo by Tim Felce.

Starlings only pay attention to the birds next to them. If their neighbors move or turn, then they follow. Not one bird looks at the bird in front. In fact, there is no bird in front. There is just one bird that happens to be in the position to change direction because it can see a reason to do so — perhaps there is a bird of prey in sight, or an obstacle or a gust of wind. It changes, and like a wave this movement flows through the flock. Not one bird copies the movement perfectly — they are just birds, not robots — and this results in the swirling motions that are basically the result of a Chinese whisper interpretation of this chain of movements.

And it works! Not one leader, no overhead and the whole group is safe. Now, it’s not perfect. It turns out that they quite often bump into each other (though this is not visible to our human eye when we watch them), but these little problems are not big enough to change the governance of the group! Some error is fine (but try to tell that to greedy shareholders).

But, I can hear you say, they are not going anywhere; what’s the long-term outlook?

Fair enough, starlings are perhaps not our perfect example. But is there an animal that combines the best of both centralized and decentralized worlds? Yes, there is. It’s got ten arms, mesmerizing eyes and a beak. The ever so intriguing squid!

Shared responsibility

Squids are amazing species in general, but the cuttlefish stands out among them. They are sneaky creatures, with a plethora of ways to disguise themselves. They have to; they are mollusks and very vulnerable if a predator would be able to get their teeth into them. So they prevent that from happening. They are masters of disguise because their skin can change color, but also texture, and their body language is so flexible they can imitate anything from a coconut rolling over the seafloor to wavy seaweed or a sturdy rock. They use this both to hide from predators and to ambush prey.

They really should be called cuddlefish. Photo by Hans Hillewaert.

Now, think about how they act when they suddenly need a hiding place. They can’t consciously decide to change all of their skin to what is around it. One part may have to be brown and lumpy, while another part needs to be more reddish and leaf-like to imitate seaweed. And they don’t: its skin does that autonomously. It turns out that squid skin can see, so it can literally adapt to what it’s ‘seeing’ in front if it. This input will direct the tiny muscle action that creates texture on the skin or dilates or contracts various coloured cells (‘pixels’ if you will). And more importantly: the brain doesn’t get to see much of this; the skin does it by itself, so the brain can look at the bigger picture: where are we going?

Tentacles work the same way, although it’s the octopus that is more remarkable in this sense. The neural networks in the legs are so autonomous that the animal may centrally decide where it wants to go, but the legs themselves decide how to move in order to make it happen. Imagine having to direct not four limbs but eight, and not with three joints in them but a sheer infinite flexibility! It’s impossible to do that with a fully centralized brain.

Yet, I feel that some of our companies are getting so large that they start to resemble octopi but with a centralized control freak. There are so many variables, yet they want to decide everything down to the movement of the tip of the legs, and this means it either takes ages before a move is executed, or it happens in a suboptimal way.

Management resembles the conviction that there is control, and that control is desirable. But these animals show us that control is only needed or productive up to a certain point.

Perhaps we can take some inspiration from the cephalopod family, and look critically at what we need to decide centrally, and what can be left to the unmanaged decentralized elements.

This may not be so alien to us

Knee jerks and hot pans

If you have trouble picturing this, we actually have something similar as humans: reflexes. Reflexes are neural pathways that run from your extremities to the spine and back. The best-known example is the knee jerk reflex, but I find the ‘hot pan situation’ a little more powerful. If you grab a pan that is unexpectedly hot, you tend to let go of it before it hurts, in other words: before you register what’s going on. That is a reflex. It’s quick, it’s decisive and it’s productive. Only after the action has been taken does your brain get the info that allows it to learn to check the pan before lifting it next time. Imagine having to think about what your course of action should be when you grab a pan that is burning your flesh deeper and deeper the longer it takes.

I feel like we have lost respect for this aspect in large organizations; people on the work floor can come up with solutions and at a quality and speed that managers can only dream of. And the added irony is of course that the larger an organization gets, the more impossible it becomes to manage everything centrally. In other words: the larger the company, the worse (slower/less quality) the decisions become.

Next time you see starlings in a group, think about all the little errors that occur despite the result being so beautiful and successful, and realize that banning out all those errors will increase overhead costs extremely, while perhaps not even making the result any better. And next time you see a cuttlefish or octopus (granted, a little less likely than starlings), think about all those decisions that never reach upper management, and that that is the fact that makes squid successful. And the next time you grab a hot pan, let go.