A survey of 761 of the largest corporations in North America and Europe showed that the number of corporate functions had increased at about a third from 2007 to 2010. Leaders at three out of four companies believed that their functions' influence had grown. At the same time, complaints about the performance of those functions were increasing. The authors combined their survey data with insights from structured interviews at large European multibusiness organizations to understand why corporate functions so often underperform and what might be done about it. They learned that the performance of these functions may well be related to how they respond to the varying management challenges they face at different life-cycle stages. In "youth," for example, the function may not be seen as valuable by all the businesses. Its mandate may be unclear, its staffing problematic, and its efforts to get up and running overhasty. In "adolescence," the function may have a tendency to expand its activities without due regard for how that affects its relationships with the business divisions. In "maturity," when it is well established and its mandate is fairly stable, it may spend too much time benchmarking and searching for best practices, diverting attention from the needs of its internal clients. In the fourth stage, which calls for change, the function's managers may fall into the trap of looking for opportunities to redeploy their skills rather than acquiring new ones. The authors discuss these and other challenges and offer remedies.

Decision making lies at the heart of our personal and professional lives. Yet the daunting reality is that enormously important decisions made by intelligent, responsible people with the best information and intentions are nevertheless hopelessly flawed at times. In part, that's due to the way our brains work. Modern neuroscience teaches us that two hardwired processes in the brain - pattern recognition and emotional tagging - are critical to decision making. Both are normally reliable; indeed, they provide us with an evolutionary advantage. But in certain circumstances, either one can trip us up and skew our judgment. In this article, Campbell and Whitehead, directors at the Ashridge Strategic Management Centre, together with Finkelstein, of Dartmouth's Tuck School, describe the conditions that promote errors of judgment and explore how organizations can build safeguards against them into the decision-making process. In their analysis, the authors delineate three "red-flag conditions" that are responsible either for distorting emotional tagging or for encouraging people to see false patterns: conflicts of interest; attachments to people, places, or things; and the presence of misleading memories, which seem, but really are not, relevant and comparable to the current situation. Using a global chemical company as an example, the authors describe the steps leaders can take to counteract those biases: inject fresh experience or analysis, introduce further debate and more challenges to their thinking, and impose stronger governance. Rather than rely on the wisdom of experienced chairmen, the humility of CEOs, or the standard organizational checks and balances, the authors urge, everyone involved in important decisions should explicitly consider whether red flags exist and, if they do, lobby for appropriate safeguards.

One-time Ford CEO and U.S. Secretary of Defense Robert McNamara was the archetypal numbers man. No human failing such as emotions could influence a decision. Like McNamara, today's CEOs who think they're basing their decisions only on reason are deceiving themselves - and jeopardizing the company's viability. These authors have written a forthcoming book on the subject, and in this article they describe how leaders can understand the powerful pull that emotions have on their decisions.

Companies attempting to grow by entering new businesses fail nine times out of 10. The problem isn't that big companies are too risk averse. Quite the opposite--new research shows that managers go after far too many phantom opportunities.

For most companies, organization design is neither a science nor an art; it's an oxymoron. Organizational structures evolve in fits and starts, shaped more by politics than by policies. Although most executives can sense when their organization designs are not working well, few take meaningful action, partly because they lack a practical framework to guide them. The authors of this article provide just such a framework; they present nine tests that can be used either to evaluate an existing organization design or create a new one. Four "fit" tests offer an initial screen: The market advantage test asks whether a design directs sufficient management attention to the company's sources of competitive advantage; the parenting advantage test determines whether the design gives enough attention to the corporate-level activities that provide real value to the company; the people test shows whether the design reflects the employees' strengths; and the feasibility test looks at constraints that may impede implementation. Five "good design" tests can help a company refine its prospective design. The specialist cultures test ensures that there's sufficient insulation for units that need to be different from the prevailing culture; the difficult-links test determines whether a design offers solutions for potentially problematic unit-to-unit links; the redundant-hierarchy test asks whether the design has too many parent levels; the accountability test looks at whether every unit has suitable controls; and the flexibility test ensures that the design lets the company adapt to change. Once a design is altered, the tests should be repeated. Organizational decisions are inevitably complex, and tweaking one part of the design may produce unanticipated consequences elsewhere.

In today's competitive markets, every company has an action plan. Yet for most managers, the processes used to create these plans don't work. The root of the problem, suggests Campbell, may be that too many companies benchmark their processes and by doing so, prevent managers from focusing on what is unique to their situation. Good planning processes, the author argues, are not generic processes but ones in which both analytic techniques and organizational processes are carefully tailored to the needs of individual businesses and to the skills of corporate managers. The author cites examples of three companies that have successfully individualized their processes: Granada, Dow Chemical Company, and Emerson Electric. A mature electrical-products business such as Emerson, he says, has different planning needs than a fast-growing entertainment business like Granada or a highly cyclical chemicals business like Dow. Different chief executives may have different insights about how to go about adding value. Take the CEOs of Granada and Dow. Both set tough targets to stretch their businesses, but the way each CEO gets his managers to commit to his targets differs considerably. Bad planning can actively destroy value, the author says. It wastes people's time and money. It sends the wrong signals to managers. It can even lead managers to follow bad advice. That's why managers should go to the effort of reexamining and possibly changing their company's planning process.

Managers can separate the real opportunities for synergy from the mirages, say Michael Goold and Andrew Campbell of the Ashridge Strategic Management Centre, by taking a more disciplined approach to synergy. Corporate executives have strong biases in favor of synergy, and those biases can lead them into ill-advised attempts to force business units to cooperate--even when the ultimate benefits are unclear. These biases take four forms: 1) the synergy bias, which leads executives to overestimate the benefits and underestimate the costs of synergy; 2) the parenting bias, a belief that synergy will be captured only by cajoling or compelling business units to cooperate; 3) the skills bias--the assumption that whatever know-how is required to achieve synergy will be available within the organization; and 4) the upside bias, which causes executives to concentrate so hard on the potential benefits of synergy that they overlook the possible downside risks. In combination, these four biases make synergy seem more attractive and more easily achievable than it truly is. As a result, corporate executives often launch initiatives that ultimately waste time and money and sometimes even severely damage their businesses. To avoid such failures, executives need to subject all synergy opportunities to a clear-eyed analysis that clarifies the benefits to be gained, examines the potential for corporate involvement, and takes into account the possible downsides. Such a disciplined approach will inevitably mean that fewer initiatives will be launched. But those that are pursued will be far more likely to deliver.

Why is it that successful strategies are rarely developed as a result of formal planning processes? What is wrong with strategy or the way most companies go about developing it? Andrew Campbell and Marcus Alexander, seasoned practitioners of the art of strategy, who consult, teach and do research at the Ashridge Strategic Management Centre, offer a "common sense" piece on why the planning frameworks managers use so often yield disappointing results. Strategy, they explain, is not about plans but insights. Strategy development is the process of discovering and understanding insights and should not be confused with planning, which is about turning insights into action. The answer is not new planning processes, better designed plans, or more effort. The answer is for managers to understand two fundamentals--the benefit of having a well-articulated and stable purpose and the importance of discovering, understanding, documenting, and exploiting insights about how to create value.

While the core competence concept appealed powerfully to companies disillusioned with diversification, it did not offer any practical guidelines for developing corporate-level strategy. To fill the gap, the authors propose the parenting framework, with tools for answering two questions: Which business should a company own? What parenting approach will get the best performance from those businesses? To determine the fit between a parent and its businesses, corporate strategists should look at four areas: the critical success factors of the business, the parenting opportunities in the business, the characteristics of the parent, and the financial results. Next, to determine which businesses to keep and which to divest, they should rank them into five categories: those that fit well; those that fit in some ways; those that fit but have little potential; those with a possibility of value destruction; and those that fit in parenting opportunities but not in critical success factors.

Almost every company wants to develop its businesses over time and earn high profits immediately, to respond quickly to market changes and make careful decisions, to coordinate business units and make unit managers accountable. But these goals are contradictory. They cannot all be achieved, no matter what the strategy decisions. Senior managers can decide, however, which goals are most important and choose a management style that works toward them. Success depends on choosing an approach that maximizes one's strengths and goals.