The corporate office consists of the CEO and the corporate functions. It is the main vehicle for delivering corporate added value. Yet corporate functions often underperform and corporate offices often fail to add value. We argue that this is because CEOs focus most of their attention on portfolio strategy and business issues and give too little attention to guiding and leading their own business – the corporate office.
Surprisingly many CEOs give too little attention to the corporate functions that make up their corporate office. This is because they consider their main priority to be business issues. This lack of attention is well illustrated by the corporate CEO of a global consumer goods company who cancelled a major project aimed at clarifying the role of the corporate functions with the words “I do not have time for this at present. We have too many pressing business problems to afford the luxury of gazing at our corporate centre navels.”
The lack of attention by CEOs to corporate functions is evident in our research on how heads of corporate functions develop strategies for their functions. We asked these leaders whether the CEO or an executive committee member briefed them thoroughly when they were appointed to lead the function. Surprisingly many said they were given little guidance. In more than 40 interviews with functional heads who report directly to the CEO, only a few had been briefed about the corporate-level strategy and the role that the function was expected to play in this strategy.
Some corporate functional heads were given the job without any guidance. Others were expected to develop a strategy for the function based on interactions with the executive committee. Some were appointed because they were known to have special skills at centralising or decentralising or setting up shared services or improving functional performance, but often still received little direct guidance. This appears to be an embarrassing critique of corporate CEOs. But, is it? Is it important for CEOs to provide the heads of corporate functions with clear guidance and, if it is, why do they fail to do so?