82% of ～200 leaders surveyed think they make the right decisions, but the time, energy, and resources required to implement them diminishes their effectiveness
Only 33% of respondents feel their decisions are executed as intended
1 in 3 companies changed their operating model in the 12 months before the study
A new research study from business advisory firm Axiom Consulting Partners (“Axiom”), suggests that companies need to consider their current size and growth objectives when developing their corporate model. The study, entitled The Corporate Model’s Effect on Performance, reflects input from nearly 200 executives at major companies from a wide range of industries.
The study found that most companies employ one of four distinct corporate model archetypes, each of which has different implications for corporate center accountabilities, operational leadership, governance, and approaches to strategic capabilities. Examples of the Operational Owner model archetype include Toyota, Walmart and BMW; companies run under the Operational Leader archetype include Pepsico, John Deere and Nike; Strategic Leader archetype companies are exemplified in Sony, Apple and Starbucks; and the Portfolio manager archetype includes companies like Berkshire Hathaway, Samsung and Nestlé. One notable difference among the archetypes is the degree of centralization or decentralization each carries.
“Companies make changes to their corporate model for many reasons, including strategic shifts, financial duress, a significant merger or acquisition, or a leadership change. Our research strongly suggests that a company’s current stage of growth is another reason to consider doing so. It provides critical evidence that supports a situationally driven approach to designing a corporate model based on growth aspirations,” said study leader Aaron Sorensen, an Axiom partner and head of the firm’s Business Transformation practice. “This may well be the most important factor to consider rather than, say, how your company’s industry competitors are organized.”
“Our analysis of the data showed that different archetypes apply to certain stages of a company’s growth,” Sorensen continued. “For example, a business with between $1 and $3 billion in annual revenues generally wants to employ a cohesive, profitable growth model to avoid performance deterioration, so relatively strong, centralized corporate control over the enterprise would be called for at this stage. And the corporate model that got a company to $1 billion is not going to be the same model that gets a company to $3 billion or $5 billion.”
The study also found that:
While 82 percent of respondents believe that their organization makes the right decisions, the effectiveness of these decisions is diminished by the amount of time, energy, and resources required to implement them
Only 33 percent of respondents believe that decisions are ultimately executed as intended
One in three companies changed their operating model within the past year with the intent of improving speed and agility, but only 60 percent report that they are now able to make decisions faster than competitors
The study analysis also provides insights into the implications of each operating model archetype on the organization of the corporate center, business units, and support functions, as well as the performance and decision-making effectiveness of each archetype. As detailed in the analysis, some corporate models create better conditions for decision making and performance than others at different points along the growth journey—there is not a one-size-fits all approach to optimizing the corporate model.
Axiom Consulting Partners' study gathered the thinking of 174 executive leaders, including CEOs, CFOs, COOs, and CHROs and global organizations ranging from $500 million to over $20 billion in annual revenue. The researchers had strong cross-industry representation, including respondents from consumer & retail, industrial & energy, insurance & financial services, and technology. Leading brands like Chubb, Constellation Brands, Delek US, Kemper, Northwestern Mutual, and Raytheon Technologies were among the represented organizations.