Crisis in New Orleans
After Hurricane Katrina hit New Orleans in 2005, 80 percent of the city was flooded, and tens of thousands of people were left without shelter and basic supplies.
Credits: Smiley N. Pool/The Dallas Morning News/AP
In this major crisis, the authorities tried to follow a traditional command-and-control system, which quickly became overwhelmed due to the large number of decisions and limited information about the actual situation and needs.
The results of this approach created major difficulties in the coordination and delivery of support to the people in need. It became "a combination of anarchy and Orwellian bureaucracy" and stands as a stark example of ineffective intervention by central authority.
Walmart and the Power of Decentralisation
Amid this chaos, Walmart became one of the few organisations to recognise the complex nature of the situation and decided to push decision-making power away from the centre, down to store managers in New Orleans. CEO Lee Scott issued a simple directive:
"This company will respond to the level of this disaster. A lot of you are going to have to make decisions above your level. Make the best decision that you can with the information that's available to you at the time, and, above all, do the right thing."
Senior managers concentrated on setting goals, measuring progress, and maintaining communication lines—no specific instructions were issued. Store managers focused their full attention on helping residents. Within forty-eight hours, half of the 126 stores that were closed due to damage and power outages were reopened, and the stores began distributing basic supplies to residents, doing whatever it took to support the community. Stories of creative and proactive actions were plentiful and fully supported by upper management.
Centralise or Empower?
Despite Walmart's demonstrated effectiveness in decentralised decision-making, the federal government declined their invitation to participate in crisis team meetings, possibly reflecting a reluctance to deviate from a traditional, centralised approach. This contrast highlights a fundamental question in managing complex crises: should power and decision-making be centralised, or should they be pushed down to the people on the ground.
Atul Gawande, in his book: The Checklist Manifesto: How To Get Things Right, uses the case of Hurricane Katrina to illustrate the limitations of central decision-making in complex environments. He suggests that rigid centralisation can hinder effective responses to rapidly changing situations, much like the federal response during the hurricane.
He argues that centralisation in response to risk and complexity is a strategy too often chosen by central authorities. In fact, centralisation shares many features with checklists—the tools that help to specify the steps which must be followed in a process. However, checklists are not meant to provide answers to complex dilemmas but rather to ensure that we have the mental capacity to focus on exceptions and unexpected changes. Gawande suggests that the same applies to the centralisation of the decision process. Like checklists, centralisation can be an effective vehicle for building frameworks, ensuring consistency, and securing readiness to manage complexity, but the actual decisions in critical situations are better managed on the ground.
It is interesting to note that similar conclusions are drawn by other authors. For example: Nassim Taleb claims in Antifragile: Things that Gain from Disorder that a combination of central government and semi-independent regions provides more stability than a fully centralised nation-state. But this is an exciting topic for another article—I’ll be back with more on this soon.
Bottom Line
"Under conditions of true complexity efforts to dictate every step from the center will fail. What is required is balancing freedom and discipline, craft and protocol, specialised ability and group collaboration." Atul Gawande
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References and Notes
Taleb N. (2012). Antifragile: Things that Gain from Disorder.
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