Turning 65 branch offices into self-accounting “companies within the company” (1978)

How long can management by giving authority away last?

The core of this decision is that, in the middle of rapid growth, it deliberately handed authority down to the sales front line. Given that Tanabe Ken had already by 1975 built a chain of command that decided on the spot and left the paperwork until later, the “company within the company” scheme of 1978 was not an idea that occurred to someone one morning; it was the point at which one president’s personal way of deciding was extended into a design principle for the whole organisation. Treating 65 branch offices as independent-P&L “managers,” and judging them on a measure as simple as value added per head, appears to have worked as a device against the bureaucratisation that tends to overtake a growing organisation.

That said, this structure also depended heavily on a scale at which Tanabe himself could grasp every branch directly, and on a self-contained business model of direct sales and responsible construction. Keeping head office deliberately small and holding to “instruct but do not manage” rests on the premise that the top can see all the way to the edge, and how that decentralising philosophy would change once the company grew further was not yet visible at the time. Even so, establishing early a mechanism that demanded the awareness of a merchant from the field, against the managerial problem of the day — the rigidity of large organisations — makes this instructive for anyone thinking about how Sekisui House was run afterwards.