that this is where it can add greatest value to its businesses, and that it hassignificantlyaffected the shape of the corporation over the years (see Illustration 6.7).Managing an organisation on this basis does, however, pose some challenges.For example
entifying capabilities of the parent
a big challenge for the corporate parent is being sure about just how it can add value to business units. If the valueaddingcapabilities of the parent are wrongly identified then, far from the businesses benefiting, they will be subject to interference from the centre in wayswhich are counter-productive. There needs to be some hard evidence of suchvalue-adding capabilities.
if the corporate parent identifies that it has value-adding capabilities in particular and limited ways, the implication is that it should not be providingservices in other ways, or if it does they should be at minimal cost. For example,some corporate parents have decided to outsource a great many servicesthat were once seen as a traditional role of the centre
legal services, payrollservices, training and development and so on. One firm, following such acourse of action, claimed that by reducing the head office workforce in suchways by over 50 per cent it would save over 60 per cent of the costs of the centre.Just as significantly it would focus the attention and management time of corporate executives on activities that really could add value as distinct frommerely administrative functions. Following the same logic in the public sector can create a dilemma. On the one hand, keeping such central services in the public sector ensures political control over social purposes ± for example, ensuringservice coverage to all sections of the community. On the other hand, a private sector company might be a better parent, in the sense that it might bemore skilled at providing the service or doing it more efficiently.
he µcrown jewel¶ problem
the corporate parent may realise that there are some business units within its portfolio where it can add little value. This may helpidentify businesses that should not be part of the corporate portfolio. Moreuncomfortably, however, such business units could be high-performing businesses,successful in their own right and not requiring the competences of the parent. The parent may argue that other businesses in the portfolio can learnfrom them; but this is the logic of synergy management rather than parentaldevelopment. The question the parental developer has to ask is how it isadding value to
business. The logic of the parental development approachis that since the centre cannot add value, it is a cost and is therefore destroyingvalue; that the parent should therefore consider divesting such a business,