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CorporateCenter, ThePowerOfAnIndependent-McKQ Mar12
CorporateCenter, ThePowerOfAnIndependent-McKQ Mar12
s t r a t e g y p r a c t i c e
The power of an
independent corporate
center
Stephen Hall, Bill Huyett, and Tim Koller
A corporate center does have the potential to cut through the tensions,
lobbying, and logrolling that often bedevil resource allocation discussions
and lead to inertia (for more on resource allocation challenges, see “How to
put your money where your strategy is,” on mckinseyquarterly.com). But few
are well organized to play this role. Some are little more than a collection
of central functions (such as treasury, legal, and human resources) that
don’t fit elsewhere in the organization. Some are more strategy focused
but primarily prepare board papers and support special initiatives for the
CEO, the chairman, or the board. At the opposite extreme, certain corporate
centers meddle in the tactics of business units. Others revolve around a
CFO who manages the balance sheet, aggregates financial report-
ing, courts investors, and provides tax and treasury services—but seldom
gets involved in strategy. Too often missing are the intense reviews,
debates, and challenges that lie at the core of value-creating corporate-
strategy decisions.
The right kind of ownership can be extremely powerful. Take the case of
the “two Bobs” at the mining company Rio Tinto, in the early 1990s. Rio’s
chairman, Bob Wilson, saw an opportunity to reshape its portfolio and
build a series of new growth platforms through a combination of bold organic
and inorganic moves. Bob Adams, the executive director for planning and
development, generated many of the ideas that underpinned the company’s
repositioning and supported the corporate agenda by building a world-
class capability to evaluate and develop businesses. Armed with independent
analyses, the two Bobs helped counteract the forces of inertia.
is more microlevel and less likely to uncover a need for wholesale shifts
out of one business area and into another. The corporate center is better
positioned to wrestle with questions on behalf of the organization as a
whole—and to propose tough solutions that business units would be unlikely
to arrive at independently.
How does each business unit stack up against its traditional peers
and new attackers on performance measures such as product quality
and innovation, the effectiveness of distribution, and cost levels?
Could other companies extract more value from any of our businesses—
and acquire them for a premium that we could invest better elsewhere?
Which units absorb more than their fair share of senior management’s
time and attention relative to their potential for creating value?