Blog • 25. October 2022

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?

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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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