"Any inefficiency of decentralization costs less than the value of fast response time"
- The Principles of Product Development Flow by Donald G Reinertsen
Agile relies on decentralized decision-making for efficiency because the teams themselves are more effective at leveraging economically feasible product development process.
Many decisions made at the team level impact the overall economics of the value stream. However, the cost (impact) of trade-offs do not need to be "dollarized" to be adequately assessed by a skilled Product Owner, given a solid understanding of the interactions between the risks, value, expenses, and cycles times inherent in software development. (For example, the cost of fixing a defect grows exponentially over time. ) A customer-centric view of software development tends to focus on the value of features (user stories) versus the risk and viability of enablers.
Decentralized decision-making requires that those who are ultimately accountable for the work (usually management) trust in those who are responsible for the work. Over time, these two partners usually develop a mutual understanding of the boundaries and guiding principles of decision-making. However, to get started, it can be helpful for an organization to provide guidance on conditions for escalation.
One possible guideline is to ask the one faced with a decision to score it on the following criteria:
Frequency (from 0 to 2) - Everyday decisions that pertain to routine activities (e.g., backlog grooming) get a 0. The types of decisions that get made once (e.g., strategy) get a 2.
Urgency (0 to 2) - Decisions that, if delayed, would have a high cost (e.g., deploying production-down fix) get a 0. Those that can wait get a 2.
Scale of Impact (0 to 2) - Decisions that are specific to the local situation get a 0. And those that would have broad benefit or impact (e.g., common technology) get a 2.
Calculate: Frequency + Urgency + Scale of Impact. As a general rule, anything that is a 4 or above is a candidate for escalation and thus centralized decision-making.