Unit managers tend to regard headquarters as a nuisance: “What does Corporate want now?” “The center is where dinosaurs go to die.” “Look out when you hear, ‘We’re from Corporate, and we’re here to help.’” Indeed, since the 1980s, the trend has been toward reducing headquarters, both in size and influence over the business units. The driving logic of this minimalist center is cost containment. Push as much cost into the businesses as possible. Then get rid of all remaining costs except those needed for corporate governance and a few essential shared services, set the right objectives, measures, and rewards—and get out of the way. Engineering a minimalist center may be an effective cost-cutting strategy, but it’s an overreaction to the once-predominant imperialist center, where hordes of staffers peer over the shoulders of line managers. Done wrong—as it often is—the minimalist center eliminates opportunities for headquarters to actually enhance the units’ performance by ensuring that they make needed investments in talent and in their own businesses. What’s the alternative? A lean, activist center. Some of today’s most respected organizations—companies like General Electric, PepsiCo, and Hitachi—make lean but influential centers a keystone of their managerial practice. The very trends that seem to call for a hands-off center—fragmenting markets, rapidly changing technologies, faster innovation cycles—sometimes require the opposite: a corporate center that engages the reflexively autonomous business units. Naturally, the units tend to focus on their own industry, on their traditional competitors, and on meeting their numbers. As a result, they can miss and may even ignore broader market trends, new competitive threats, or game-changing opportunities. The activist center encourages, cajoles, and sometimes pushes line managers to take off the blinders, look outside established business unit boundaries, and preempt competitors. Activist centers gain their clout by rotating executives with specific skills from the units into teams in headquarters, generally for two-year assignments. These teams comprise the company’s most talented up-and-coming (or sometimes nearing-retirement) business unit executives. Only accomplished managers with extensive line experience have enough credibility to command the respect of senior line executives and, ultimately, persuade them to treat the center as a resource. Instead of having a defined role, these teams focus their energies on a few key corporate priorities at a time. And rather than impose a process and an agenda on the units, the teams engage unit managers in a dialogue and in mutual efforts to effect change. At GE, Jeffrey Immelt uses the center, as Jack Welch did before him, to identify and drive major themes throughout the corporation, including “Be Number One or Number Two,” “Six Sigma Quality,” and, currently, “Growth.” The themes, once they’re endorsed by the business unit leaders, are executed within the businesses with the help of the small teams from headquarters, together with outsiders hired expressly for the purpose. Help can take many forms, such as assistance in accelerating product development or training Six Sigma black belts. Team members are expected to achieve success during their brief tenure in a way that leads to their next assignments within the businesses. By actively managing the careers of these superior executives, headquarters ensures that the corporation develops leaders with a breadth of experience and that business capabilities are transferred across the units. Routinely cycling a few of your top people through headquarters may seem risky: Will the units suffer when you extract talent? Will these transplanted line executives become effective consultants to the businesses? Will there be a job for them when it’s time to return to the businesses? But the costs of running a lean but less-engaged center—timid strategies, underleveraged capabilities, and underdeveloped talent—are riskier still.
