Every organization that grows beyond a certain scale wrestles with the same dilemma. How much control should the corporate center exert, and how much freedom should local units have? Get the balance wrong, and you either drown in bureaucracy or descend into chaos. The Operating Model principle of “Define the Role of the Center” exists to prevent both extremes.
The center is often misunderstood. Many leaders see it as the place where reporting happens and corporate policies are issued. In reality, the center can be a powerful lever for value creation if defined deliberately. It can capture scale efficiencies, provide cross-unit synergies, and build capabilities that individual units cannot achieve on their own. At the same time, it must avoid suffocating local execution and responsiveness.
Why the Role of the Center Is Strategic
The center is not just an administrative hub. It is a design choice that reflects the organization’s strategy. If scale matters more than speed, the center should play a strong role in consolidating processes and centralizing decision rights. If market responsiveness matters more than scale, the center should empower units to move fast with minimal interference.
The challenge is that strategy shifts over time. A high-growth organization may initially prioritize speed, leaving decisions decentralized. As it matures and scales, efficiency gains become critical, leading to greater centralization. Leaders must revisit the role of the center continuously to ensure alignment with strategic priorities.
The Three Roles of the Center
The center typically performs three roles.
- Control and oversight. At a minimum, the center enforces standards, ensures compliance, and maintains enterprise-level governance. Without this, risks multiply and external stakeholders lose confidence.
- Scale and efficiency. The center can capture synergies by centralizing activities such as procurement, IT infrastructure, or brand management. This avoids duplication and creates cost savings.
- Enablement and support. The most advanced role of the center is to act as an enabler. It provides shared capabilities, talent pools, or technology platforms that units can leverage to accelerate performance.
Each role has value, but overemphasis on control creates bureaucracy, while overemphasis on enablement without oversight creates disorder. The Operating Model must strike a balance that reflects the organization’s strategic needs.
Case Examples of Balance in Action
Pharmaceutical organizations often centralize R&D to capture efficiency and knowledge scale, but leave market access decisions to local teams who understand regulatory and customer dynamics. Retail organizations frequently centralize procurement and brand standards while decentralizing merchandising to stay close to local consumer preferences. Technology organizations often centralize cybersecurity, an area where consistency matters most, while giving product teams freedom to innovate.
Each of these examples shows how clarity on the role of the center can deliver both efficiency and agility. The key is explicit choice. Ambiguity creates duplication and conflict.
Diagnostic Questions for Leaders
Leaders must ask tough questions about their center.
- Does the center create value beyond compliance and reporting?
- Are criteria for centralizing versus decentralizing clear and transparent?
- Do units understand what they can decide independently versus what requires central input?
- Is the center focused on enabling value or simply exercising control?
These questions help leaders confront whether their center is a value-adding asset or a bureaucratic burden.
Common Pitfalls in Defining the Center
Several pitfalls undermine this principle. The most common is “creep.” Functions in the center slowly accumulate decision rights, policies, and reporting requirements, often without clear rationale. Over time, the center becomes bloated and units become disempowered.
Another pitfall is inconsistency. Some activities are centralized informally while others are decentralized, leading to confusion. Units struggle to know where authority resides.
A third pitfall is failing to evolve. The role of the center that worked five years ago may be misaligned with current strategy. Without deliberate reevaluation, the center becomes a relic rather than a lever.
Lessons from the Global Service Case
The global service organization that evaluated four Operating Model options—country-based, matrix with country leadership, matrix with functional leadership, and global functions—faced this exact dilemma. The “matrix with functional leadership” model was chosen because it balanced scale and agility. The center provided global functional leadership to capture efficiencies, while local units retained flexibility to navigate regulatory environments and customer needs.
The structured evaluation demonstrated that the center cannot be defined on instinct. It must be proven against fact-based principles, including clarity of role.
Why This Principle Is Difficult
Defining the role of the center touches leadership dynamics directly. It challenges power structures and resource allocations. It requires some leaders to relinquish authority and others to take on accountability they may not want. These human dynamics often make the principle politically charged.
Yet avoiding the conversation is costly. Unclear centers waste resources, slow execution, and erode morale. Leaders must have the courage to define, communicate, and enforce the role of the center explicitly.
What Leaders Must Confront
- Where does the center genuinely create enterprise value?
- Where has creep created unnecessary bureaucracy?
- Are decision rights between center and units explicit and respected?
- Does the center evolve as strategy evolves, or has it become stagnant?
Clear answers to these questions ensure the center operates as a lever for performance, not as an obstacle.
The Payoff of Getting it Right
When the role of the center is defined deliberately, organizations capture scale benefits without losing agility. Units understand their autonomy, leaders know where authority resides, and duplication is minimized. Decision-making accelerates. Efficiency improves. Strategy execution becomes smoother.
When the role of the center is left ambiguous, the opposite happens. Units compete for authority. Resources are wasted. Leaders complain about bureaucracy. Execution slows. Strategy falters.
The principle of defining the role of the center may appear straightforward, but it is often the most politically challenging and the most consequential. Leaders who address it head-on create organizations that can adapt, scale, and execute. Leaders who ignore it risk turning their center into a costly bottleneck.
Interested in learning more about the steps of the approach to Operating Model Design? You can download an editable PowerPoint presentation on Operating Model Design here on the Flevy documents marketplace.
Do You Find Value in This Framework?
You can download in-depth presentations on this and hundreds of similar business frameworks from the FlevyPro Library. FlevyPro is trusted and utilized by 1000s of management consultants and corporate executives.
For even more best practices available on Flevy, have a look at our top 100 lists:
Top 100 in Strategy & Transformation
Top 100 in Organization & Change
Top 100 Consulting Frameworks
Top 100 in Digital Transformation
Top 100 in Operational Excellence
Comments