Corporate Strategy and Parenting

4977 Words Oct 18th, 2010 20 Pages


Corporate Strategy and Parenting Theory
Michael Goold, A n d r e w Campbell and Marcus A l e x a n d e r

PAPER PROVIDES A BRIEF summary of what w e a t the Ashridge Strategic Management Centre believe we have learned about corporate strategy over the last ten years. It lays out the basis for our ideas about corporate parenting and the implications of parenting theory for management decisions. It is structured around nine propositions, each of which attempts to convey both what we have learned and w h y it matters. The paper concludes with our views about where future research priorities should lie. THIS

In November 1987, the Ashridge Strategic Management Centre was established, with the mission of carrying out
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PROPOSITION: Parent companies compete with each other for the ownership of businesses: The objective of corporate strategy should be to add more value to the businesses in the portfolio than other rival parent organisations would.

Value Destruction
What We Have Learned Corporate hierarchies inevitably destroy some value. Apart from the obvious issue of corporate overheads, the main problems relate to ill-judged influence from senior managers and to information filters. Since senior corporate managers must divide their time between a number of businesses in the portfolio, they will always be less close to the affairs of each business than its own management team. Inevitably, there is a danger that their influence will be less soundly-based than the views of the managers running the businesses. Corporate hierarchies encourage business managers to compete with each other for investment funds and for personal promotion. Business managers therefore tend to filter the information they provide to divisional and corporate management, in order to present their businesses in the most favourable light. The information on which corporate managers must base their influence and decisions tends to be systematically biased. The corporate centre also tends to be insulated from the sort of critical examination of cost effectiveness that other parts of a company routinely receive. Processes to assess net

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