http://www.chaordicsolutions.co.uk/blog/from-our-business-transformation-consultants/using-corporate-center-profitability-to-assess-effectiveness/
Extract from strategy+business – Ken Favaro:
Senior executives seeking to gauge the effectiveness of their company’s corporate strategy might look at any number of factors: the company’s shareholder returns, its growth rate, its market share, or its price-to-earnings multiple. Yet none of these markers would tell the whole story. In fact, they might lead executives to precisely the wrong conclusions.
The one true measure of a corporate strategy is the profitability of its head office. Yes, that’s right, we’re talking about “corporate,” that “dead weight” of administrative functionaries most business unit leaders love to loathe as nothing more than an oppressive cost center that taxes the “real” parts of the business with onerous compliance requirements, excessive monitoring, redundant reporting, countless initiatives, endless meetings, and intrusive staff. Of course, in strict accounting terms, corporate headquarters is a cost center because it has no revenues. But it can and should be profitable. In fact, a profitable corporate center is both literally and figuratively at the center of corporate profit itself.
Continued … http://www.strategy-business.com/article/00173?
Author: Ken Favaro is a senior partner with Booz & Company based in New York and global head of the firm’s enterprise strategy practice.
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