More Effective Management – How To Create A Business With A Rock Solid Foundation
The starting point should be to assume that no head office is necessary
It is not only multi-nationals that fall into the trap of centralising too many people at head office. One company employing only a few hundred people is organised quite sensibly into three divisions based in different parts of the country, each one serving a different market segment, but it employs three management accountants at head office, each one assigned to 'look after' and help a particular division. This is nonsense. The management accountants should be located within the divisions and report to the divisional general manager, not to the group finance director. There is a niggling concern in the minds of the divisional general managers that the management accountants act as head-office spies on occasions, so they fail to consult the accountants as much as they should.
The aim should be to employ the minimum number of people centrally, and those people should be of the highest calibre. Wherever possible, people should only spend a 2- or 3-year period at head office, before returning to a line-management job.
The essence of a strategic business is that it should be large enough:
• to have the resources under its own control to achieve success in a market sector and/or geographical region, which may be worldwide
• to have, or to plan to achieve, a significant market share or market leadership, as appropriate, within the geographical region to be served
• to be organised into separate profit centres, as appropriate, with each one serving a particular market segment, country or region
The strategic businesses should be sufficiently few in number and distinctive from each other to be easily perceived and understood by customers and investors alike. This is not to recommend a return to conglomerate groups. Only a small proportion of large conglomerates have demonstrated a record of sustained success over longer than a decade.
Strategic businesses for an electronics company, for example, may be quite distinctive from each other and yet related by nature. They could be:
• telecommunication systems
• military communication systems
• consumer electronic products
• electronic systems for building manag
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