Inside business: The perils of planet HQ

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The Independent Online
NOT SO long ago, the corporate centre was the place to be. Even if you were not the chief executive or a senior lieutenant, if you were at headquarters you were where the action was.

This is not to say that all corporate centres were alike back in the 1980s. Oil companies and other large organisations still had substantial staffs, reflecting their spread in terms of not just geography but range of operations.

In fact, in some cases, the bureaucracy became so immense that those working there lost sight of the fact that they were supposed to be supporting their colleagues out in the field and almost became ends in themselves.

To many people, the antithesis of such a bloated approach was the style associated with such companies as Hanson and Williams, where a lean corporate centre kept a close eye on operations by means of teams of single-minded managers charged with keeping the business units on the straight and narrow.

However, different as the two methods were, they were also alike in one regard: they did not entrust managers of the individual parts of the business with much power.

Of course, it is possible to argue that, in the former example, an executive in a far-flung part of the organisation could get on with things pretty much as he saw fit because the people at headquarters were too concerned with their own manoeuvrings to notice. But when it came down to it, he would still have to have initiatives approved by them, often via a labyrinthine process. In the latter example, of course, there was little room for individual decision-making; those running various parts of the organisation were often doing not much more than obeying orders.

With the recession of the early 1990s the distrust of initiative only intensified. Senior executives battened down the hatches, conglomerates went out of fashion and tight budgets and other cost controls became the order of the day.

Then, gurus and consultants started to notice that just as the big companies seemed unable to stem the flow of job losses, a new breed of entrepreneurial companies was springing up, seemingly oblivious of an economic downturn. Flexibility, adaptability and speed became the order of the day.

ABB, the Swiss-Swedish engineering colossus created by the indefatigable Percy Barnevik, became a popular model. Its tiny Zurich head office and the constant globe-trotting of Mr Barnevik became legendary, even if few people could quite identify what it was that the company's various far- flung operations did.

Although the odd company has gone so far down this route that calls to the head office can sometimes go straight to the chief executive, few have really embraced the idea with such fervour.

Nevertheless, coalface cynics who feel that they always bear the brunt of cutbacks will be pleased to see there is a definite trend towards smaller headquarters. According to a study by Towers Perrin, a management consultancy, there has been a dramatic fall in the size of head-office staff. Where once a centre that was actively involved in running the company housed more than 1,600 people, it would now have 600. Centres less directly involved in operational matters are smaller still.

However, encouragingly efficient as all this sounds, it is not all good news. The study published last week finds that there is a great deal of confusion about the role of corporate centres.

This obviously affects those who work at the centre, but the consultants also find that those in the operating units are often unclear about what head office is doing for them. One of the most obvious problem areas is human resources. Executives are often unsure whether central staff are setting mandatory corporate policy, offering guidelines, or providing services.

The solution appears clear: it matters less what style of corporate centre a company goes for than how it communicates that style. Even a small and lean corporate centre is a drain on resources if it does not know what it is supposed to be doing.