It has been reported that the University of Tokyo has decided to shift its Faculty of Medicine-affiliated hospital to direct management by the university headquarters as part of governance reforms. This move, prompted by a series of corruption scandals involving doctors, is said to aim at “strengthening governance.”
Many business owners who saw this news likely had the same question: “Should our company also put a problematic department under direct headquarters control?” Indeed, when problems arise, moving to “direct headquarters control” or “under direct management” seems intuitive, easy to understand, and appears to offer a quick fix.
However, let’s pause for a moment and think. Is this prescription of “direct control” truly a “fundamental treatment” that cures the organization’s root illness? Or is it merely a “symptomatic treatment” that only suppresses the symptoms? Using this University of Tokyo case as a reference, this article delves deep into the balance between “integration” and “autonomy,” and the ideal form of governance that prevents “division”—essential considerations for SME owners designing their own organizations.
The Unexpected Side Effects of “Direct Control”
According to reports, the University of Tokyo plans to shift its Faculty of Medicine-affiliated hospital from the current management line of “Dean of the Faculty of Medicine → Hospital Director” to a system of direct management by the university headquarters (trustees and vice presidents). This follows the discovery of multiple misconduct cases, such as the misappropriation of research funds by doctors, which highlighted deficiencies in internal controls.
At first glance, this seems like a natural “tightening of control.” One might think that if headquarters keeps a direct watch, misconduct will be easier to prevent. In many SMEs I have observed, when trouble occurs in a business unit, a common response is, “Let’s have management directly receive reports and give approvals for that department.” However, this simple solution has a significant pitfall.
That is the risk that “centralization of authority” simultaneously causes “ambiguity in responsibility” and “loss of autonomy on the front lines.” The more headquarters tries to manage every detail, the more front-line managers become “waiting for instructions from headquarters,” eroding their ability to think and take responsibility independently. As a result, new problems arise in areas where headquarters’ oversight doesn’t reach, or even minor decisions require upper-level approval, critically slowing down business operations. This is precisely the moment when “division of labor” transforms into “division” or fragmentation.
Two Fundamental Questions to Ask Before “Control”
So, what should managers first consider when misconduct or problems occur? It is not to immediately change the management system, but to confront the following two fundamental questions.
Question 1: Why Was Information Blocked?
In the University of Tokyo’s case, why did the misuse of research funds go undetected for several years? It is likely because there was no mechanism for appropriately sharing and visualizing information about operations and risks between the “Faculty of Medicine,” the “Hospital,” and the “University Headquarters.” In SMEs as well, it is not uncommon for physical or cultural distances—between sales and development departments, or headquarters and factories—to create “information silos” and hinder early risk detection.
The essence of governance is not “surveillance” but “information design.” Who should share what information, with whom, and at what timing? Without designing this “flow of information,” simply centralizing authority at headquarters is meaningless if the crucial information itself doesn’t flow upward.
Question 2: Is the Front-Line Incentive Design Appropriate?
Another core issue is incentives (motivation). The reported corruption scandals may not be explainable solely by individual researchers’ ethics; there could be underlying organizational pressures or distortions in the evaluation system. In an environment where outcome metrics like “number of papers” or “amount of external funding obtained” are overly emphasized, and the process (proper use of research funds) is neglected, incentives for misconduct can easily arise.
In SMEs too, sales organizations that excessively pursue only “sales targets” while neglecting legal compliance in contracts or accountability to customers carry significant compliance risks. Governance reform is not merely about adding rules; it is the work of revisiting the organization’s fundamental incentive design—determining “what actions to reward and what actions to deter.”
Three Concrete Actions SMEs Should Take
So, what practical steps can be taken to prevent “division” and balance “integration” and “autonomy” within your own organization? Here are three actionable steps you can start immediately.
Action 1: Create an “Information Flow Map”
First, separate from your current organizational chart, create a map that visualizes “the flow of information necessary for important decision-making.” For example, when important events occur—such as “contracts with new clients,” “expenditures above a certain amount,” or “specification changes”—trace how that information flows: from whom to whom, in what format (verbal, email, report), and at what timing. Drawing this out will clearly reveal “division points” where information stagnates or falls through the cracks. This map is the foundational blueprint for designing governance.
Action 2: Redefine the “Types” and “Levels” of Authority
The term “delegation of authority” is often used, but it doesn’t function if left vague. Authority has types, such as “execution authority” (can execute independently), “approval authority” (requires supervisor’s approval), and “reporting authority” (post-facto reporting is sufficient). Furthermore, set “levels” according to the amount of money or size of the risk involved.
For example, clearly define for a department head: “Grant execution authority for contracts up to medium risk level. However, post-facto reporting is mandatory.” This allows the front lines to operate autonomously within a defined scope, while headquarters can avoid missing critical information. “Direct control” should be positioned as a last resort, only when this definition of authority is completely dysfunctional.
Action 3: Conduct Regular “Governance Dialogues”
The most important step is to create a forum for dialogue between the front lines and administrative departments, rather than imposing rules from the top. Even once a quarter is fine. Gather executives, heads of each department, and administrative departments (general affairs, accounting) to have frank discussions on the following themes:
- “Are there any parts of the current rules or reporting processes that are hindering business?”
- “In recent minor failures or near-miss incidents, were there any issues with information sharing or decision-making processes?”
- “Do our performance evaluation metrics encourage desirable behavior?”
Through this dialogue, continuously check whether the rules have become mere formalities or if they align with front-line realities, and make fine adjustments. It is essential to recognize that governance is not a static rulebook that is “created and finished,” but a dynamic mechanism that needs to be “cultivated.”
The “AI Compliance Outsourcing” Trend Highlights Another Division Risk
Another news item mentioned here for reference—”AI BPO Compliance Response Outsourcing Services”—is also suggestive when considering organizational division. While this service, where AI handles customer responses on behalf of the company, offers the benefit of efficiency, it also carries the risk of separating the important customer touchpoint of “compliance response” from the company’s “real voice.”
Customer complaints and inquiries are valuable sources of information for quickly learning about product/service defects, insufficient explanations, or market changes. Completely outsourcing this to an external AI might be akin to severing the organization’s own “sensory organs.” Utilizing technology itself is not bad, but it should be positioned strictly as a “tool for collecting and analyzing information,” with humans retaining responsibility for final judgment and organizational learning. This, too, can be seen as a pitfall of easy “externalization and division.”
Conclusion: Governance is the Design of “Connection”
The news about the University of Tokyo’s direct control of its affiliated hospital shows that even large organizations face the fundamental challenges of “silos” and “division.” And these challenges are universal, regardless of an organization’s size.
The essence of governance is not top-down “tightening of control.” It is designing how effectively the various parts of an organization are “connected” towards a common purpose, while each possesses the necessary information and appropriate authority. “Direct control” is like emergency surgery for when that connection is completely severed. The mundane, continuous work of creating an “information flow map,” defining “types and levels of authority,” and maintaining through “governance dialogues”—this is the most solid method to prevent organizational rigidity and maintain the balance between autonomy and control.
When inspecting your company’s governance, try reviewing it from the perspective of “where is division occurring, and how can we reconnect?” rather than “where should we tighten control.” Therein lies the hint for the true reform that will guide your organization to its next stage of growth.
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