Over the past six years, we have collected and analyzed data on overhead costs from about 300 companies, primarily multinational in scope, across more than a dozen manufacturing and service industries. Our goal was to find out how the best of these companies squeeze savings from their general-services and administrative budgets.¹ We found that decentralization, so popular in the 1990s as corporations expanded, makes sense when decisions might affect the strategy or the operations (such as recruiting) of an individual unit or location. But decentralization creates fragmentation, and in many administrative areas a simplifying approach is better.

The most successful of the companies we studied have examined their administrative operations to pinpoint cases in which local rules or business concerns really make variations necessary. They then eliminate the needless ones, so that similar operations are carried out in the same way in all of their sites. Uniformity not only fosters economies of scale—the same manuals can be used throughout a company, for example—but also enables best practices to be shared widely whether the actual work remains decentralized or takes place in a shared service center. Common processes also put the spotlight on (and therefore increase the effectiveness of)...