What the Research Found
Decision rights and the bottleneck problem. Paul Rogers and Marcia Blenko, both then partners at Bain & Company — Rogers leading the firm’s London office — surveyed executives at more than 350 global companies for their Harvard Business Review analysis of decision-making effectiveness. Only around 15% of respondents said they worked in an organisation that helped the business outperform its competitors. The research identified four recurring points where decision-making stalls: between global and local levels, between the centre and business units, between one function and another, and between an organisation and its outside partners. The consistent finding across the surveyed companies was that governance strain rarely announced itself as a single dramatic failure. It accumulated as a series of stalled or revisited decisions, each individually minor, each a symptom of unclear ownership.
Growth phases and recurring crisis. Larry Greiner’s long-standing analysis of organisational growth describes a pattern of five phases — creativity, direction, delegation, coordination, collaboration — each ending in a crisis produced by the practices that solved the previous phase. The crises Greiner identified are explicitly governance-shaped: a leadership crisis as an organisation outgrows informal founder control, an autonomy crisis as functions push back against centralised direction, a control crisis as decentralisation goes further than oversight can track, and a red-tape crisis as coordination mechanisms calcify into their own obstacle. Governance pressure, in this account, is not a single problem to be solved once. It recurs at every major growth transition, in a different form each time.
Ownership, control and agency costs. Michael Jensen and William Meckling’s foundational analysis in the Journal of Financial Economics examined what happens once the people directing an organisation are no longer its sole owners. Wherever one party (an owner, a board, a set of principals) engages another (managers, executives) to act on their behalf, the paper argues, some divergence between the agent’s incentives and the principal’s interests is structurally unavoidable — what the authors termed agency costs. This is a different kind of governance pressure from the ones above: not a coordination failure between functions, but a structural gap between who bears the consequences of a decision and who actually makes it. That gap widens, almost mechanically, as ownership becomes more distributed — through external investment, multiple founders, private equity involvement or eventual public ownership — all of which are more common, and more common earlier, in London’s investment-dense environment than in most UK regions.
Incentives working against stated intent. Steven Kerr’s classic analysis of reward systems, examined across manufacturing, insurance, politics, medicine and academia, found a recurring pattern: organisations frequently reward behaviour that runs directly against what they claim to want, then express surprise when people optimise for what is actually measured and paid for rather than what is stated. “Most organisms,” Kerr wrote, “seek information concerning what activities are rewarded, and then seek to do… those things, often to the virtual exclusion of activities not rewarded.” Applied to governance specifically, this explains a pattern many growing organisations recognise: formal governance structures exist and are technically followed, while the actual incentive structure quietly routes decisions around them.
Where They Agree, and Where They Diverge
Across these four bodies of work, one point of convergence is strong. Governance pressure is not primarily a compliance problem, a paperwork gap, or a matter of writing better policies. Rogers and Blenko, Greiner, Jensen and Meckling, and Kerr are examining organisations through entirely different methods — a global executive survey, longitudinal case analysis, formal economic theory, and behavioural field observation, respectively — and each arrives at some version of the same underlying claim: governance strain is a structural consequence of growth and distributed ownership, not a symptom of insufficient rule-writing. An organisation can have extensive governance documentation and still experience acute governance pressure, because the documentation was never the load-bearing element.
Where they genuinely diverge is on where the pressure originates and, by implication, where attention should focus. Rogers and Blenko’s survey-based work locates the problem at the level of individual decisions — specific points where ownership is unclear and a call stalls or gets revisited. Jensen and Meckling locate it structurally, in the separation between ownership and control itself, arguing that some tension is unavoidable the moment those two roles are no longer held by the same people. Greiner locates it temporally, treating governance pressure as something that recurs in phases rather than something to be permanently resolved. Kerr locates it behaviourally, in the gap between what an organisation says it rewards and what it actually rewards. None of these accounts contradicts the others directly, but they point a leadership team toward genuinely different places to look first — decision logs, ownership structure, growth-stage history, or incentive design — and a team that has only absorbed one of the four risks concluding the problem is solved once that one lever has been pulled.
What Remains Unresolved
None of this research settles whether London’s specific business environment changes the underlying pattern or merely accelerates exposure to it. The available evidence points more strongly toward acceleration than transformation. ONS data on UK business activity confirms London accounts for close to a fifth of all VAT- and PAYE-registered businesses in the country, a concentration far beyond any other UK region, alongside the largest concentration of professional, scientific and technical businesses — the sector most directly exposed to the regulatory and investor-governance pressures Jensen and Meckling describe. A market this dense also means organisations reach the ownership-distribution thresholds that widen agency gaps — external investment, multiple founders, board formation — earlier in their growth than a comparable organisation might elsewhere, simply because the surrounding infrastructure of investors, advisors and institutional capital makes each of those steps easier and faster to take.
What is genuinely unresolved is whether that acceleration changes the nature of the governance work required, or simply compresses the timeline on which the same work has to happen. Neither the decision-rights literature, the growth-phase literature, the agency-cost literature nor the incentive-design literature was constructed with a specific city’s density in mind, and none of it directly tests whether governance pressure that arrives faster requires a different response than governance pressure that arrives slowly. That is a genuine gap rather than a settled finding, and it is worth naming honestly rather than resolving it with confidence the evidence does not yet support.
There is a further complication specific to a market this competitive for talent. Kerr’s incentive-divergence finding and Jensen and Meckling’s agency-cost analysis both assume a reasonably stable relationship between an organisation and the people making decisions on its behalf. London’s labour market works against that stability in a way few of these studies were designed to account for: with specialist roles easier to move between than almost anywhere else in the country, the individuals occupying key decision points change more frequently, which means whatever informal governance norms existed around a given decision often leave with the person who held it, rather than persisting as institutional knowledge. None of the four bodies of research reviewed here directly measures that turnover effect, which is precisely the kind of gap a market-specific observation can usefully name without overstating what the underlying evidence actually shows.
Where this shows up
The questions here are set in London. More Perspectives for this market are on the London page, and the Markets index shows the other business hubs.
Questions worth considering
- Which governance issues in the organisation are being addressed first, and is that the one actually causing the strain — compliance obligations, decision-making friction, tension between owners and management, or a gap between what is said to be valued and what is rewarded?
- Where do decisions stall — between the centre and business units, between one function and another, or with outside partners — and would the decision log show it?
- When the person who held an informal governance norm leaves, what happens to that norm?
- Is the pace of growth in a dense market bringing ownership-distribution questions forward earlier than the organisation’s governance arrangements were designed for?
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