Corporate Headquarters

Corporate headquarters are getting bigger and are managing increasingly complex systems, says new Roland Berger study

Headquarters of large corporations are getting "smarter" – and bigger. Over the past years, companies around the world have responded to increased complexity and cost pressure with further centralization. At the same time, shared services and outsourcing remain important tools for providing services efficiently. These are some of the most prominent results of the fifth "Corporate Headquarters" study published by Roland Berger's Corporate Performance CC.

Our conversations with clients on the setup of their corporate headquarters focus on the following questions:

• Are your headquarters lean or do you see room for further enhancing efficiency (without compromising quality)?
• What should be the scope and structure of your headquarters?
• What role do your headquarters play in managing operational business?
• Do your headquarters generate an advantage to the business and is this recognized?
• Do your headquarters use the right tools and methods to optimally respond to the above questions?

Over the past few years, we have observed a strong increase in complexity. In response, we have identified five approaches to designing modern corporate headquarters that address this higher level of complexity:

1. Provide expert knowledge, e.g. through centers of excellence
   
   Global information flows call for the bundling of relevant knowledge. This can be achieved by centers of excellence that identify company-wide best practices and share insights with external experts. The corporate headquarters create added value by making this knowledge available and defining overarching standards, processes and tools.
2. Manage services, e.g. through shared services and outsourcing
   
   Corporate headquarters are expected to act as a service provider, e.g. by focusing on qualitative improvements, managing shared services and controlling outsourcing partners. In practice, savings from outsourcing are often overestimated; this requires close supervision by corporate headquarters.
3. Form strong entities, e.g. a corporate office
   
   There is a trend toward small, centralized units for handling strategic and governance tasks – the best examples are a corporate office, corporate compliance, corporate development and corporate organization. After having been abolished for quite some time, these units have recently experienced a strong comeback.
4. Work in networks, e.g. in project teams
   
   Work is increasingly being done in teams that replace traditional organizational units like departments. A central program management office assumes a crucial role in this process. Numerous companies have initiated corporate programs that aim for company-wide and continuous improvement by allocating work in a project structure.
5. Create a sense of identity, e.g. in terms of joint values
   
   A company-wide corporate culture creates a sense of identity. The main effects are a stronger identification with the company, a clear value proposition, greater employee retention, common objectives and greater mobility within the company. It is the responsibility of corporate headquarters to ensure this sense of identity, thereby reducing uncertainty among employees.

Whether and to what extent these approaches are followed depends on each company's individual requirements. The structure and size of corporate headquarters must be aligned to the necessities of the current corporate framework. We have identified three aspects that define future corporate headquarters:

• Centralized control, decentralized management – striking the right balance of centralization and decentralization, focusing specifically on the degree of centralization per function
• Shift in the center of gravity – breaking up traditional location paradigms and shifting headquarters' value creation to align with the company's global footprint
• Project and process orientation – with project business becoming day-to-day business, the traditional organizational structure is supplemented by virtual structures

Since 1999, Roland Berger Strategy Consultants has regularly conducted its "Corporate Headquarters" study to identify current and long-term trends in structuring headquarters.

The latest edition of the Roland Berger study Corporate Headquarters 2010 (PDF, 3456 KB) focuses on the size of corporate headquarters and presents five approaches to designing modern corporate headquarters. The focus was expanded and now covers companies from all over the world.

The next edition of the study will take place in 2012. If you would like to take a closer look at your corporate headquarters and see how structure, size or role compare with current trends and other players, please do not hesitate to contact one of our experts.