Inside business: Headquarters can seriously damage your wealth

THE TRICKY balancing act involved in running a corporate headquarters was well illustrated by a story in The Independent last week (15 September) that Regent Inns was doubling head office expenditure and strengthening its accounting controls. The pubs operator, which issued a serious profits warning earlier in the summer, wanted to ensure that previous errors with sales figures were not repeated.

As obvious a response as this may be, it actually flies in the face of much of the current management wisdom. For example, Michael Fradette, co-author of a recently published book, The Power of Corporate Kinetics (Simon & Schuster, pounds 17.99), sees the corporate machine as the enemy of the sort of flexible, adaptive and innovative behaviour that he believes is essential for the survival of the modern business.

And certainly the lesson managers are always being urged to pick up from the likes of the engineering group ABB is that - when it comes to the centre - less is more.

But, of course, there is a thin line between innovation and chaos and between people being given responsibility for their own actions and duplicating what others are doing elsewhere. Which is where the corporate centre should come in.

The latest contribution to the area comes from the newly created accounting firm, PricewaterhouseCoopers.

In its new booklet Corporate Centre Transformation it points out that "corporate centres can seriously damage organisational wealth" and that the "universal role" for corporate centres should be to add value to the group.

While many succeed in this aim, recent experience suggests that there are significant numbers of under-achievers which are destroying up to half of a company's capitalised value. "The hurt, however, runs much deeper than this, as consistent exposure to a mediocre headquarters will not only stunt development, but also kill creativity, and threaten long- term survival," the booklet says.

And chief finance officers questioned in a recent survey by the firm are alive enough to the problem that about two-thirds of them said they were at least "somewhat dissatisfied" with the headquarters environment.

According to PwC, the three key causes of the damage are excessive costs resulting from corporate centres being too large; lost opportunities stemming from a mismatch between the skills and resources at the centre and the needs of the actual and potential business units; and damaging influences associated with the centre's traditional role of seeking to transfer policies and strategies from one area of the business to another.

"Often such guidance has proved to be inappropriate, as strategies that have worked in one business are not seen to work in another," says the report. It adds that, while past attention has rightly focused on excessive costs, lost opportunities and damaging influences have been largely ignored.

So how does an organisation go about dealing with this? According to the booklet's author, David Pettifer, a partner specialising in cost management, corporate centres need to see themselves as middlemen justifying their existence through adding shareholder value. And the key to this is measurement, Mr Pettifer says.

"Bureaucracy and over-confidence can easily debilitate the centre," writes Mr Pettifer. "Centre managers must remember that their key role is to add value rather than develop procedures. Core activities should be defined and sized, given continuous objectives and bench-marked to see if they are still in line with peer companies."

Start your day with The Independent, sign up for daily news emails
ebookA unique anthology of reporting and analysis of a crucial period of history
peopleMathematician John Nash inspired the film Beautiful Mind
Richard Blair is concerned the trenches are falling into disrepair
newsGeorge Orwell's son wants to save war site that inspired book
Life and Style
Audrey Hepburn with Hubert De Givenchy, whose well-cut black tuxedo is a 'timeless look'
fashionIt may be a paradox, but the industry loves it
Arts and Entertainment
The pair in their heyday in 1967
Life and Style
fashionFrom bathing dresses in the twenties to modern bikinis
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Abuse - and the hell that came afterwards

Abuse - and the hell that follows

James Rhodes on the extraordinary legal battle to publish his memoir
Why we need a 'tranquility map' of England, according to campaigners

It's oh so quiet!

The case for a 'tranquility map' of England
'Timeless fashion': It may be a paradox, but the industry loves it

'Timeless fashion'

It may be a paradox, but the industry loves it
If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

Could have done with Osama bin Laden staying alive?

Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
New exhibition celebrates the evolution of swimwear

Evolution of swimwear

From bathing dresses in the twenties to modern bikinis
Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine