TL;DR

Consolidation isn’t evil or good - It’s a tool that can create efficiency or stifle innovation depending on how it’s done
History shows cycles - We’ve swung between centralization and decentralization for centuries, like a pendulum
Public vs. private matters - Government consolidation affects democracy differently than corporate mergers affect markets
Power grabs are real - Many reorganizations are about accumulating authority, not improving outcomes
Data should drive decisions - But too often we get cherry-picked data that supports predetermined conclusions
Gradual beats shock treatment - Slow, iterative changes work better than massive overnight restructuring
Local innovation gets lost - Centralization sacrifices the experimentation that comes from diverse, smaller players

The Consolidation Pendulum: Finding Balance in an Age of Endless Reorganization

I keep hearing about the latest corporate restructuring, government reorganization, or “efficiency initiative.” And honestly? I’m tired of the black-and-white thinking around these moves. The normal folk don’t understand that consolidation and reorganization can be both good and bad—sometimes simultaneously.

The truth is more nuanced. These decisions affect real people, real jobs, and real communities. And whether we’re talking about the public sector or private sector makes a huge difference in how we should think about the tradeoffs.

The Historical Pendulum: We’ve Been Here Before

This isn’t new. As historian Anthony Gregory noted, “The struggle between centralization and decentralization is at the core of American history.” We’ve been swinging back and forth on this pendulum for centuries.

Look at ancient China—they mastered this dance. Chinese imperial cycles alternated between periods of centralized control and decentralized governance, depending on whether they needed to restore military power or allow regional innovation to flourish. When centralization became too rigid, they’d decentralize. When chaos emerged from too much local autonomy, they’d centralize again.

The computing industry shows this same pattern. We started with centralized mainframes, swung to personal computers and distributed systems, then back to cloud computing and centralized services. Each swing brought benefits and costs. Friedrich von Hayek argued that “free markets themselves are decentralized systems where outcomes are produced without explicit agreement,” but even markets swing between fragmentation and consolidation.

The Power Grab Problem

Here’s what gets me: too often, consolidation is really about power accumulation disguised as efficiency. When someone pushes for centralization, ask yourself—who benefits? As Confucius observed, “When wealth is centralized, the people are dispersed. When wealth is distributed, the people are brought together.”

I’ve seen this play out repeatedly. A leader comes in talking about “eliminating redundancies” or “streamlining operations,” but the real goal is expanding their sphere of control. They cherry-pick data showing potential cost savings while ignoring the costs of lost local knowledge, reduced innovation, and decreased responsiveness to regional needs.

The research backs this up. Corporate consolidation data shows that workers of firms targeted by takeovers experience heightened job loss—6 percentage points less likely to remain employed, with average income dropping by over 1,000 euros for affected workers. Meanwhile, executives often see their compensation packages expand significantly.

Public Sector vs. Private Sector: Different Games

This is crucial—we can’t treat government consolidation the same as corporate mergers. In the private sector, market forces provide some check on terrible decisions. If a company consolidates poorly and becomes inefficient, competitors can emerge. In government? No such luck.

Government consolidation affects democratic participation differently too. Research shows that when there are too many levels of government, citizens become overwhelmed and disengage. This fragmentation of attention allows wealthier interests to capture these systems and shape them to their advantage. But over-consolidation in government can eliminate local input entirely.

Corporate consolidation, meanwhile, creates different problems. Three major agricultural mergers (Dow-DuPont, Bayer-Monsanto, and ChemChina-Syngenta) have begun reshaping global agriculture, drastically reducing competition in crop protection, seeds, and petrochemicals. This isn’t just about efficiency—it’s about market control.

The Innovation Cost

Here’s what consolidation advocates don’t want to discuss: the innovation you lose. Herbert Simon noted that “the real trick in highly reliable systems is somehow to achieve simultaneous centralization and decentralization.”

Research shows that large companies shift R&D resources to the least risky investments when they consolidate markets. They focus on “input traits and major crops promising greater returns on investment” rather than breakthrough innovations. Why? Because when you dominate a market, incremental improvements to existing products are more profitable than disruptive innovations that might cannibalize your revenue streams.

Decentralized innovation management shows 42% higher regional market adaptation rates and a 28% increase in successful local product launches. Smaller players experiment with crazy ideas because they have to—they can’t rely on market dominance. Some of those crazy ideas become the next big thing.

The Data-Driven Lie

Everyone claims their consolidation plan is “data-driven.” But I want to see transparent, long-term data—not cherry-picked metrics that support predetermined conclusions.

When someone says “I’ve done this before and it worked,” my first question is: worked for whom? Did it work because shareholders got rich for two quarters before you moved to your next position? Or did it create sustainable, long-term value for all stakeholders?

The evidence on consolidation failure rates should give us pause. Research shows that 80% of reorganizations fail to deliver their desired value. Only 32% succeed when organizations have just one critical success factor in place. With five or more factors? Success rate jumps to 88%. So why do we keep rushing into poorly planned consolidations?

Real data-driven decisions would consider: - Long-term employment effects, not just short-term cost savings - Innovation metrics, not just operational efficiency - Regional economic impacts, not just corporate profits - Democratic participation effects for government consolidation - Customer satisfaction and choice, not just revenue concentration

The Gradual Alternative

Why does consolidation have to be like ripping off a band-aid? Why can’t restructuring happen gradually, allowing us to course-correct as we learn?

Successful decentralized organizations prove this works. Companies that empower local teams to make decisions see faster innovation cycles because “the teams that are actually implementing the innovation make most of the decisions related to them.” This saves time and allows rapid iteration.

The same principle applies to consolidation. Start small. Test changes in one region or division. Measure actual outcomes—not projected savings, but real results. Then iterate. If it’s working, expand gradually. If not, adjust or try a different approach.

This approach would prevent the massive disruptions that destroy institutional knowledge and demoralize workforces. It would also create opportunities to capture benefits from both centralized efficiency and decentralized innovation.

Finding the Balance

I’m not against consolidation when it makes sense. Some organizations do grow too big and unfocused. Some government agencies develop redundant functions that waste taxpayer money. Growth and contraction should be iterative processes that happen regularly, not traumatic events every few years.

As Karl E. Weick observed, “The real trick in highly reliable systems is somehow to achieve simultaneous centralization and decentralization.” The goal should be dynamic balance, not permanent optimization for one end of the spectrum.

This means: - Centralizing functions that truly benefit from scale and standardization - Keeping decision-making close to the people affected by those decisions - Preserving space for local experimentation and cultural adaptation - Building feedback loops that detect when the balance is off - Accepting that perfection is impossible—the goal is stability with adaptability

The Long Game

The pendulum will keep swinging. Centralized systems become too rigid and bureaucratic, so we decentralize. Decentralized systems become chaotic and inefficient, so we consolidate. The key is recognizing where we are in the cycle and making conscious choices about direction and speed.

Instead of massive, bet-the-company reorganizations driven by executive egos or quarterly earnings pressure, we need leaders who understand that organizational design is an ongoing conversation between competing values: efficiency vs. innovation, control vs. autonomy, standardization vs. adaptation.

Most importantly, we need to be honest about the tradeoffs. Stop selling consolidation as a panacea that will magically deliver both efficiency and innovation. Acknowledge that you’re optimizing for certain outcomes at the expense of others. Then make sure those tradeoffs align with your long-term strategic goals and values.

The question isn’t whether to centralize or decentralize—it’s how to dance consciously with both forces to create organizations and societies that can adapt, innovate, and serve human needs over the long term. That’s a conversation worth having, based on transparent data and honest assessment of what we’re trying to achieve.

Because at the end of the day, these decisions affect real people trying to make a living and real communities trying to thrive. They deserve better than reorganization theater disguised as strategic planning.