Three Paradoxes of Leading Multiple Business Units

As your company expands or as you progress up the ranks in your company, you will likely move from having P&L (profit and loss) responsibility for one business unit to having P&L responsibility for several different business units (usually located in several different geographic markets).

To be successful in this role, you will have to balance three paradoxes.

1.  Centralization v. Local Autonomy

Centralization often leads to efficiencies and lower costs.

  • Requiring all business units to buy from a few vendors allows for the pooling of purchases. This often leads to volume discounts, favorable terms, and lower costs.
  • Instituting standard ways of reporting and standardized processes facilitates best practice sharing and learning across business units.

But, every piece of centralization takes away authority and responsibility from the local management team.

  • In nearly every multi-location business, it is this passion for running a business and having autonomy that drives local management to succeed in their local market.
  • A business unit with real autonomy is a far more attractive place to work.
  • Talented people thrive on the challenge of running their own show with minimal impact (but a whole lot of support) from a corporate parent.

A strong push towards centralization may reduce costs in theory, but the potential loss in local management accountability (“it’s my ship”), passion, make it happen (without endless approvals), and talent can be grave.

On the flip side, a strong focus on local autonomy can lead to local fiefdoms and the loss of all advantages and learning that comes from being a part of a bigger corporate entity.

2.  National (or Global) Marketing v. Local Market Knowledge and Positioning

A corporate-level marketing program (national or even global) can be very effective:

  • It helps build a unified brand and name recognition.
  • It can help drive traffic and business to the local business unit.

But, corporate marketing can often be vague, clumsy and ill-suited to the local marketing requirements and local market positioning of the business unit. One size does not fit all:

  • A business unit that is the third player in a competitive market will need a totally different marketing, positioning and promotion strategy from one that is a dominant player in a fast-growing market.
  • The responsiveness and ability to add new products and service appropriate for that local market needs to be present.

Yet, complete autonomy in marketing at the local level has its limits. The marketing strategy across all business units needs to be consistent with the vision of the company and live up to and support the overall brand.

3.  Treating Everyone the Same While Leading Differently

In running multiple business units, one leadership style does not work for everyone. The culture in the business unit and the culture in the geographic location determine the appropriate way to work with the different units:

  • The “in your face” style perfectly acceptable in the Northeast (especially New York) just will not work in the Southeast or Midwest.
  • The laid-back and informal “California style” will fail miserably when dealing with a business unit in Germany or Japan.

Despite the different leadership styles, you still need to be consistent in how you work with each business unit:

  • Consistent in requiring that people agree with and live your values.
  • Consistent in promoting your vision.
  • Consistent in holding everyone accountable to perform to the same high standard.

Conclusion

Depending on your company and your business, the scales tip a different way for each of these three paradoxes. The successful multi- business unit leader will find the right and appropriate balance in his or her leadership to make each of the locations the best that they can be while fitting well into the overall corporate whole.

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About David Shedd

David has been a President - CEO - COO of an up to $350M group of manufacturing, distribution, specialty retail and services companies, having led 22 different businesses from turnarounds to start-ups to fast growth companies.
This entry was posted in Business Acumen, Leadership, Perform / Execution and tagged , , , , , . Bookmark the permalink.

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