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    seeks to employ its own competences as a parent to add
value to its businesses. Here, then, the issue is not so much about how it can help
create or develop benefits across business units or transfer capabilities between
business units, as in the case of managing synergy. Rather parental developers
have to be clear about the relevant resources or capabilities they themselves have
as parents to enhance the potential of business units. Suppose, for example, the
parent has a great deal of experience in globalising domestically based businesses;
or a valuable brand that may enhance the performance or image of a business; or
perhaps specialist skills in financial management, brand marketing or research
and development. If such parenting competences exist, corporate managers then
need to identify a µp pp 
a a business or businesses which are not
fulfilling their potential but where improvement could be made by the application
of the competences of the parent ± for example, a business which could
benefit by being more global, by brand development or by central R&D support.
The competences that parents have will vary. Royal Dutch Shell would argue
that it is not just its huge financial muscle that matters but also that it is adept
at negotiating with governments, as well as developing high-calibre internationally
mobile executives who can work almost anywhere in the world within a
Shell corporate framework. These competences are especially valuable in allowing
it to develop businesses globally. 3M is single-mindedly concerned with
inculcating a focus on innovation in its businesses. It tries to ensure a corporate
culture based on this, set clear innovation targets for its businesses and elevate
the standing of technical personnel concerned with innovation. Unilever has
increasingly sought to focus on developing its core expertise in global branding
and marketing in the fast-moving consumer goods company, with supporting
state-of-the-art research and development facilities to back it up. It would argue

    


 

 
 

 


   


   

  






   


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that this is where it can add greatest value to its businesses, and that it has
significantly
affected 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
r 
 p  p  a big challenge for the corporate parent is
being sure about just how it can add value to business units. If the valueadding
capabilities of the parent are wrongly identified then, far from the businesses
benefiting, they will be subject to interference from the centre in ways
which are counter-productive. There needs to be some hard evidence of such
value-adding capabilities.
ÿ  if the corporate parent identifies that it has value-adding capabilities in
particular and limited ways, the implication is that it should not be providing
services 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 services
that were once seen as a traditional role of the centre legal services, payroll
services, training and development and so on. One firm, following such a
course of action, claimed that by reducing the head office workforce in such
ways 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 from
merely 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, ensuring
service 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 be
more skilled at providing the service or doing it more efficiently.
  p  the corporate parent may realise that there are some
business units within its portfolio where it can add little value. This may help
identify businesses that should not be part of the corporate portfolio. More
uncomfortably, 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 learn
from them; but this is the logic of synergy management rather than parental
development. The question the parental developer has to ask is how it is
adding value to  business. The logic of the parental development approach
is that since the centre cannot add value, it is a cost and is therefore destroying
value; that the parent should therefore consider divesting such a business,
realising a premium for it and reinvesting it in businesses where it can add
value. Logical as this may seem, it is unlikely to find favour, not least because
the executives at the centre might be indicted by their own shareholders for
selling the µcrown jewelsa.
 p  this, in turn, raises the question as to whether the parent
could adopt multiple rationales in its parenting. For example, could it simultaneously
act as a parental developer for some of its businesses with a handsoff,
almost portfolio approach, for those in which it cannot add further value?
Or could it be both a synergy manager and a parental developer? The dangers
are, of course, that the rationale becomes confused, the centre unclear as to
what it is trying to achieve, the business unit managers confused as to theirrole in the
corporation and the cost of the centre escalates. A multiple
approach also raises the issue of multiple control styles in corporate bodies
(see section 6.6 below), and in particular whether this is feasible.
˜    if the logic of the parental developer is to be followed then the
executives of the corporate parent must also have µsufficient feela or understanding
of the businesses within the portfolio to know where they can add
value and where they cannot this is an issue taken up in section 6.5.3 below
in relation to the logic of portfolios.
The three roles of the parent can be considered in terms of the possible valueadding
roles of corporate parents suggested in section 6.4.1 above. Exhibit 6.7
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identifies how the main value-adding roles of corporate parents might differ in
line with the discussion in sections 6.4.2±4 (though it should be noted that other
value-adding roles may be performed as well).
Clearly much of the above also has implications for how a multi-business
corporation
is organised and managed. In particular there are implications about the
way in which the corporate parent interacts with and seeks to exercise more or
less control over the businesses. Much of this has already been intimated above.
A portfolio manager is likely to exert minimal strategic control, leaving businesslevel
strategy to chief executives of the businesses, and exercising control more
through clear and challenging financial targets. On the other hand, the synergy
manager and parental developer may be intervening a good deal in the businesses
in order to achieve synergies across the business units or provide parental
benefits. What would be very counterproductive is for the means of control to be
inconsistent with the logic of the corporate parent. For example, if a portfolio
manager were to have a diverse portfolio but try to intervene in the strategies of
the businesses, it would very likely lead to disaster. Conversely, if a synergy
manager
tried to make transferences between business units without having an
understanding of those businesses and involving themselves in the strategy of
those businesses, it could be chaos.Ê