Career of a Top Manager: when a manager of one business becomes the head of several businesses
Does the work of a top manager change when the company acquires or launches additional businesses, and how?
Does the work of a top manager change when the company acquires or launches additional businesses, and how? Intuitively, it seems as if something is going to be different in the manager’s use of time, focuses, skills and attitudes to be effective and efficient in the new role. Very little has been said about this subject. The reason is simple: a large number of Estonian organizations are essentially so-called single-business organizations. One produces and sells dairy products, the second provides accounting services, the third provides construction services, etc. At the same time, we already have companies that have grown into business groups (e.g. forestry group Lemeks, Eesti Energia, etc.).
Let there be an example from the world stage – the Royal Dutch Shell (hereinafter Shell). It is an oil and gas company of British-Dutch origin and operating on the international stage, headquartered in The Hague, The Netherlands. The company employs more than 80, 000 people. Shell delivers virtually all parts of the oil/gas business vertical and not only. For example: search for new deposits, production (upstream); refining, distribution and sales (downstream); production and sale of oil-based chemicals; trading; green energy business (biofuels, wind energy, etc.). Shell is also a very large retail company with its 44000 service stations (for comparison: Circle K has 59 full-service stations, 17 automatic stations and 2 convenience stores in Estonia). So this is a serious giant led for many years by Dutch leader Ben van Beurden. Van Beurden grew to be chairman of Shell’s board of directors in-house from their chemicals business in the same way that Microsoft’s current CEO, Satya Nadella, came from the company’s cloud services business.
What must change in the head of a manager, if one day he can manage not only his old business, but also new ones, and has to make decisions in areas whose wider contours he knows but not in detail? At first glance, it seems that if you have successfully managed one business, then it will not be difficult to manage a whole portfolio of businesses after a while. If the head of one business has so far valued the success of his own business first and foremost, then now a step higher must be taken and start to value the performance of all businesses. This can be emotionally challenging when you yourself have previously been in the role of a business manager. Another challenge is not to go hand-in-hand into the management of a particular business if the desired results do not manifest.
In the management of a group of businesses, complexity in strategic management increases. Answers need to be found to questions about the combination of businesses in the portfolio (is this enough today? will there be synergies? Do they balance any business risks?), organizational design (e.g., centralization of functions versus decentralization; establishing group level, etc.), general development trends, capital allocations and financing. What kind of businesses need to be added, changed, developed so that the company is positioned correctly? Management decision-making must be based more and more on empiricism: does the company have the necessary data and tools to make decisions?
On the soft side, the head of the business group must have the skills of developing business leaders. A business manager needs to have an understanding of who his potential successors are among industry leaders should he one day leave.
At the group level, management becomes more holistic. The manager of portfolio of businesses must understand the intricacies of running various businesses, understand the developments in society, technology and industry. They need to prepare themselves to make high-impact decisions, take greater risks and act in vague situations. The ability to lobby may become important.
It should be said that in many organizations there is no direct level of management of portfolio of businesses, but this role is already performed by the CEO. In international conglomerates, these roles can also be separate. One good example here is Berkshire Hathaway (BRK), led by legendary investor Warren Buffett. BRK’s portfolio of businesses consists of companies operating in a wide variety of industries. The conglomerate’s insurance business is run by Ajit Jain.
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