Corporate Headquarters

In the sixth edition of its corporate headquarters survey, Roland Berger Strategy Consultants unveils five ways outstanding headquarters add value, going beyond the traditional focus on cost and efficiency. The study rounds out the findings with an action plan to address the parenting advantage paradox, in which headquarters are expected to reduce costs while adding more value.

Eighty-six top firms from sixteen countries participated in the study, spearheaded by the Corporate Performance CC. The survey focused on the role of and value contributed by corporate headquarters. The participants were asked several questions, including:

• When dealing with operational units, what role does corporate headquarters assume and to what extent?
• What basic trend do you see regarding the centralization/decentralization of companies?
• How does your corporate headquarters add value?
• Do you see a need to make your corporate headquarters more international?
• Will virtual/location-independent work practices gain importance in your firm?

Roland Berger Strategy Consultants conducted its first corporate headquarters study in 1999. Since then, the study has gone beyond the standard benchmarking analyses and focused on specific issues that concern modern corporate headquarters. Increasingly complex business environments are creating fresh challenges for corporate headquarters and therefore require new approaches to value creation. Below are some of the compelling findings from this year's corporate headquarters study:

Corporate headquarters face the challenge of the parenting advantage paradox,

namely, they are expected to achieve more with less. The average cost of headquarters ranges from 2% to almost 7% of sales, depending on the management concept and industry cluster. This puts pressure on corporate headquarters to demonstrate to stakeholders that they are "parenting" their businesses, thus justifying their existence. Half of the companies exploit economies of scale using shared services, with IT being the most frequently shared service center function. The shared service centers of European companies are still located in Europe (80%), but offshoring to the Asia-Pacific region is expected to increase.

A geographical shift among headquarters is unlikely to happen in the near future.

The locations of headquarters are not following the shift toward Asia that has been observed in sales, markets and production. Instead, 80% of the study participants expect to expand their headquarters' capacity in Western Europe, while 60% of the participants believe they need to make their headquarters more international. For most firms, this means greater involvement of the corporate headquarters in cross-border projects as well as relocating international employees to central locations.

Study participants expect their headquarters to play a stronger business partner role in the future.

More than half of the companies surveyed also expect their headquarters to undergo a role shift in the near future, becoming more of a business partner.

Virtual collaboration is increasingly important.

Over half (53%) of the companies surveyed expect an increase in new location-independent work practices, which aim to enhance cooperation across departments and ensure proximity to the market.

Decentralized support functions have spawned new challenges:

69% of the respondents named poor communication, while 51% reported a lack of alignment in strategies and goals.

Corporate headquarters traditionally help shape the company's identity by cultivating a common culture and shared values. They communicate the company's raison d'être and DNA, both internally and externally. At the same time, corporate headquarters are responsible for allocating resources and ensuring compliance with legal requirements.

Our Corporate Headquarters Study identified five ways that outstanding companies add value. They are:

• Providing strategic direction
• Managing complexity
• Strengthening innovation
• Working in global networks
• Ensuring execution

Roland Berger Strategy Consultants conducts its Corporate Headquarters study every two years to identify current and long-term trends in structuring central and head offices. The latest edition of the Corporate Headquarters study (short version) (PDF, 2059 KB) provides the key to solving the parenting advantage paradox and offers a new perspective on corporate headquarters.

Together with an action plan detailing five ways to add value, our Corporate Headquarters Study is an essential reference on best practices of successful modern corporate headquarters.

Roland Berger Strategy Consultants offers individual benchmarking to examine how to make your corporate headquarters more efficient and responsive. Get in touch with any of our experts today.