Johnson asks: do we need head offices?

“Is a head office the heart and soul of a business—or the fatal enemy of progress?” he asks. “For a lot of firms I see, it can easily become the latter. This disease can infect any organization with remote branches”—including restaurants, he points out.

The risk is that people at head office lose touch with the day-to-day realities of life at the grass roots of the business. “Gradually the centre becomes an overhead, not a benefit. Activities there are an end in themselves, rather than a support to the places where sales and delivery are actually happening.”

With so many different functions for a business to cover, like IT, HR, training and marketing, the temptation to expand a central office can grow. But they can quickly add to the overheads and become a burden on a company. “I look at some organograms and all I can see is empire building… Yet when I question all this expense I find every penny is sacrosanct, defended by all those at the main office.” But in fact, the real money is being made out in the branches of a firm.

Johnson says the solution is to keep a small headquarters while delegating authority out across the company’s network and outsourcing wherever possible. “Avoid creating an organization with personnel charts showing dozens of highly qualified bigwigs who don’t work in the field. They are rarely essential and the resentment and office politics they cause often outweigh any possible advantage they bring to the enterprise.”
 
For the full story, see Luke Johnson: The head office disease.