To Centralize or Decentralize – That is the Question

In the world of corporate real estate, businesses often wrestle with the decision to centralize or decentralize control over their remote facilities. Unfortunately, there is not a simple, right or wrong solution to the dilemma. At the end of the day, it typically boils down to culture. Highly structured organizations almost always insist on making such decisions at the corporate level. Conversely, entrepreneurial companies often empower management at the local office level to take charge of their requirements.

Centralized approaches attempt to conform real estate decisions to a standardized ”one size fits all” formula. It is certainly easier to control, track and benchmark such transactions. A familiar example of this approach is evident with retail store locations. Whether you are in Boston, Chicago or Los Angeles, such retailers as The Gap, Barnes & Noble or McDonalds look and perform pretty much the same. Obviously, branding plays a large role in the conformity, but so does a centralized business philosophy.

In decentralized organizations, local management takes charge of the location and physical attributes of facilities. Their decision making process tends to be more personal in terms of preferences and local market knowledge. Ultimately, local management will always be responsible for the financial consequences of their real estate commitments. There is no escaping the obligation to shape facility decisions in such a way as to best support the performance of the enterprise. A more costly property that enables the business to excel in revenue and profit generation may well be better than the cookie cutter, cost effective property dictated by the corporate office.