1. The role of the corporate parent

2. The Functions of Corporate Management
Decisions over diversification, divestment, and
allocating resources between businesses.
Managing the
Corporate
Portfolio
--Assisting business strategy formulation
--Monitoring and controlling performance
of the businesses
Guidance and
control of
individual
businesses
Sharing and transferring resources and capabilities
Managing
linkages
between
companies 42

3. The corporate centre or ‘parent’
The corporate centre or ‘parent’ is anything that sits above the level of the strategic business units (SBUs) of the organisation
An SBU is a part of the organisation for which there is a distinct client group. So it usually relates to a collection of related activities or services, but might not be neatly reflected in the structure of the organisation

4. SBUs The corporate parent Head office Central services (e.g. finance)
Division A
Division B
Division C
Division D
Division E
Functions
Functions
Functions
Functions
Functions 12

5. The role of the ‘centre’
Increasing value for money through
Efficiency/leverage
Expertise
Investment and competence building
Fostering innovation - coaching/learning
Mitigating risk
Image/networks
Collaboration/co-ordination/brokerage
Standards/performance assessment
Intervention (e.g. acquisition, disposal, change agency)

6. The parenting ‘school’
The essence of the parenting school is that value is created through the use of key resources found at the corporate centre which are properly matched to the types of SBUs in the organisation portfolio. Value in this case can mean a number of things including: providing opportunities for SBUs to develop; creating linkages between SBUs; providing central services to SBUs; and protecting the interests of SBUs

7. Corporate parenting
These core ‘parenting’ resource of corporate headquarters can offer:
Central functions and services, e.g. international treasury management
Corporate development initiatives, e.g. centralised R&D or new acquisitions
Additional finance for growth areas: principle of product portfolio/ growth share matrix
Formal linkages between businesses, e.g. the transfer of key resources such as technology or employees

8. Corporate parenting
For parenting to add value, the role of headquarters
needs careful scrutiny. Specifically, the parent needs
two skills:
Understanding of the key factors for success in all industries of its subsidiaries
Ability to contribute something extra, perhaps in one or more of the basic parenting areas such as Finance, HRM or R&D.

9. Conditions for value creation
Value is only created under three conditions
Business units are not fulfilling their potential
parenting opportunity
Centre has relevant resources or capabilities
parenting skills
Centre managers understand the business units well enough to avoid destroying value
sufficient feel

10. The Synergy School Synergy can occur in situations where two or more
activities/processes complement each other to the extent that
their combined effect is greater than the sum of their parts.
This can be achieved via:
Through sharing resources
Transferring skills
Related products/services
Related customers/clients
Related by competence

11. The corporate parent: adding value through synergy
Centre
Arenas
Services 4

12. Corporate parent as middleman
Government department, funding Agency,
sponsor, or shareholders
Parent Organisation
Parenting skills
SBUs 10

13. Managing Linkages between Businesses
BASIC ISSUE How does the corporate centre add value to the business?
---Depends on nature and extent of linkages between the
businesses
SIMPLEST FORM OF LINKAGE Common corporate services (e.g. finance, legal, taxation, R&D, public relations, investor relations)
PORTER’S CLASSIFICATION OF BUSINESS LINKAGES AND CORPORATE STRATEGY TYPES
Portfolio management Parent creates value by operating an internal capital market between independent businesses
Restructuring Parent create value by acquiring and restructuring inefficiently managed businesses
Transferring skills Parent builds competitive advantage by transferring capabilities
Sharing activities Parent shares common resources/capabilities
NEED FOR A COMMON “DOMINANT LOGIC”
Close integration between the business portfolio, the nature of linkages between the businesses, and the management systems of the corporation

14. Parenting ‘Styles’ Strategic Planning (controller)
Financial control (orchestrator)
Strategic control (coach)

15. Parenting ‘Styles’
Strategic Planning (controller):Parents closely involved with their SBUs in the formulation of their business plans. Parents provide a clear overall sense of direction within which their SBUs develop their strategies and take the lead on selected corporate development initiatives.
Financial control (orchestrator):Parents strongly committed to the decentralisation of planning to their SBUs which are structured as stand-alone units with as much autonomy as possible.The parents primary roles are to insist that all decisions are ‘owned’ by the SBU’s, and that proposals met agreed financial criteria.
Strategic control (coach):planning is decentralised to the parents SBUs, but the parents retain a role in measuring and assessing their SBU plans. SBUs expected to take responsibility for developing strategies, plans, and proposals in a ‘bottom-up’ manner.

16. Procedures and rulebooks
CENTRE
(Masterplanner)
Detailed
budget
Establishment
Imposed
services and
infrastructure
Capital
allocation
Procedures and rulebooks
Bargaining
(item by item)
DIVISION/DEPARTMENT
Strategic planning

17. (Shareholder/banker)
CENTRE
(Shareholder/banker)
Targets
‘single line’
Capital bids
Performance
appraisal
DIVISION/DEPARTMENT
Financial control

18. CENTRE DIVISION/DEPARTMENT (Strategic shaper) Strategic control
Policies
Agreed
business
plan
Optional
services and
infrastructure
Overall
strategy,
balance
Capital
allocations
Performance
assessment
Short-term
constraints (e.g.
establishment)
DIVISION/DEPARTMENT
Strategic control

19. Recent Trends: Reinventing GE
Organisational initiatives of Jack Welch:
Delayering --- from 9 or 10 layers of hierarchy to 4 or 5, simultaneously decentralising decisions.
Reformulating strategic planning --- from formal, document-intensive analysis to direct face-to-face discussion of key issues.
Redefining the role of HQ --- from checker, inquisitor, and authority to facilitator, helper, and supporter.
Co-ordinating role of HQ --- corporate HQ to lead in creating the “boundaryless corporation” where innovations and ideas flow and where horizontal co-ordination occurs to respond to new opportunities.
HQ as change agent --- corporate HQ driving force for continual organisational change (e.g. “workout”). 53