“We Will Need to Check That”: Centralization and Control at the Boardroom During Crisis

Centralization and control of decision-making is widely accepted as a viable strategy for uncertainty reduction. While a major organizational change program to face external turmoil can take years, changing how strategy is made can be through quickly (e.g., deciding organizational levels involved in decisions). Information processing and decision centralization are key components of this crisis-induced decision-making process. During crisis, the Board demands more and more varied information as a cogent response to risen business complexity. This centralization is coupled with a tighter constriction in control to executives, placing decision responsibility on higher hierarchical levels (i.e., the Board). Concentrating decision-making at the senior level may be positive for decision quality, but reduced discretion may impact executive morale. More and more complex information and concentrated decisions offer other undesirable outcomes (i.e., deciding late is equivalent to deciding poorly), or have unsought implications for decision-making effectiveness in terms of cost or quality. Difficulties turn companies more pragmatic, but this centralization also nurtures lack of trust (e.g., between the Board and executives). Beyond executive frustration, micro-management may also affect decision quality or timeliness. Formalization is another reaction stemming from organizational or individual reactions to a riskier environment, particularly under stricter laws, and Board Secretaries play a key role in this process. The second strategy to increase Board formalized control over decisions is related to the adoption of bureaucratic structures with Board-delegated tasks and reporting systems, potentially affecting decision timeliness. Risk aversion may be the main driver behind all this centralization and control struggle; this is a natural human reaction under crisis (i.e., fear).