Corporate Strategy and Parenting
BRIEF
CASE
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 research focused on corporate-level strategy and the management of multi-business companies. In November 1997, we ran a major conference to
Justifying the Parent
What We Have Learned
In multibusiness companies, the existence of a corporate parent, by w h i c h we mean all those levels of management that are not part of customer-facing, profit-responsible business units, entails costs. These costs, w h i c h include not only corporate overheads but also knock-on costs of corporate reporting in the businesses, are not balanced by any direct revenues, since the corporate parent has no external customers for its services. Furthermore, the business units often feel that they could be i n d e p e n d e n t l y viable and, indeed, could do better without a corporate parent. This belief is given credence by the success of so m a n y management buy-outs and spin-off companies. The parent can therefore only justify itself if its influence leads to better performance by the businesses than they would otherwise achieve as independent, stand-alone entities. It must either carry out functions that the businesses would be unable to perform as cost-effectively for themselves or it must influence the businesses to make better decisions than they w
CASE
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 research focused on corporate-level strategy and the management of multi-business companies. In November 1997, we ran a major conference to
Justifying the Parent
What We Have Learned
In multibusiness companies, the existence of a corporate parent, by w h i c h we mean all those levels of management that are not part of customer-facing, profit-responsible business units, entails costs. These costs, w h i c h include not only corporate overheads but also knock-on costs of corporate reporting in the businesses, are not balanced by any direct revenues, since the corporate parent has no external customers for its services. Furthermore, the business units often feel that they could be i n d e p e n d e n t l y viable and, indeed, could do better without a corporate parent. This belief is given credence by the success of so m a n y management buy-outs and spin-off companies. The parent can therefore only justify itself if its influence leads to better performance by the businesses than they would otherwise achieve as independent, stand-alone entities. It must either carry out functions that the businesses would be unable to perform as cost-effectively for themselves or it must influence the businesses to make better decisions than they w