Putting headquarters in its place: A lean, global corporate core

Published: June 23, 2008

Executive summary

This report addresses the challenges of organizational design and proposes a new approach to organizing senior management around the Global Core. It presents four models for this new view of senior management, drawn from our own consulting experience and the firm’s study of hundreds of other corporations. These models of the Global Core are pertinent to a variety of organizations ranging from highly diversified financial holding companies to more industry-specific companies where operational involvement by senior management does succeed in creating value. They can serve as the basis for evaluating an individual company’s needs, and determining the appropriate level of corporate senior management activity.

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Symptoms of an ailing headquarters

Are you finding it difficult to manage the complexity of a large, global operation?

  • Has your corporate headquarters staff grown smaller without making business units more market responsive?
  • Or has the corporate headquarters staff remained stubbornly high while the rest of the organization downsized?
  • Are fast-growing divisions held back because they have to fight with troubled businesses for resources?
  • Does your company have trouble sharing information and transferring best practices across organizational lines?
  • Do your business units have redundant service units?
  • Have your division managers ever run the numbers on taking their businesses public?
  • Are corporate cost allocations significantly higher than the value delivered to the business units?

If you answered yes, then chances are your company is ripe for a re-examination of the structure of corporate headquarters itself. Most companies that have restructured themselves to become more marketresponsive have left the essence of their corporate center intact. We propose that a contemporary networked company needs a radically redesigned corporate headquarters structure, which we call the Global Core.

Strategy& has been working with many organizations to make them more effective at doing their jobs. We have seen in each case that the more the divisions are required to look to headquarters for making decisions, reviewing and avoiding direct responsibility for their actions, the less effective they are in meeting the immediate challenges of doing business.

The test of any complex organization is whether the whole is worth more than the sum of its parts. Somehow the corporate headquarters has generally escaped that test. The value that the corporate center provides has always been assumed, but rarely measured. If it were measured, the corporate center might have a tough time justifying its existence.

It doesn’t have to be this way. We believe that by remaking itself as a Global Core, corporate headquarters can ably represent the corporation in the world of the public and investors, perform essential work for the operating divisions, provide leadership and create the context for growth.

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Putting headquarters in its place: A lean, global corporate core