Parenting Advantage
(Goold, Campbell)

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What is Parenting Advantage? Description

The Parenting Advantage model is a framework that describes how a parent company can (help) create value. In their article, "From Corporate Strategy to Parenting Advantage", Michael Goold and Andrew Campbell argue that the parent company should not only add value to a business unit, but add more value than any other potential parent - they call this: "Parenting Advantage". In their book: "Corporate-Level Strategy: Creating Value in the Multibusiness Company", they mention four types of parental value creation:

Four types of parental value creation

  1. Stand-alone influence. Each subsidiary is viewed as a separate profit center. Using basic performance targets, the businesses are controlled and monitored. Value creation is provided by making strategic decisions such as the appointment of managers and approving major capital expenditures.

  2. Linkage influence. Value is created by improved co-operation and synergy benefits.

  3. Central functions and services. Corporate value is created through the provision of administrative and managerial services to the businesses.

  4. Corporate development. Value creation through portfolio management.

Some authors have claimed the role of the corporate center should be minimal. Hedley: The overarching role of the corporate level is that of portfolio manager: to manage the allocation of scarce financial resources amongst the business units. Others, such as Hamel & Prahalad, have emphasized the importance of synergy: The corporate center should not be just another layer of accounting, but must add value by enunciating the strategic architecture.

Which type of influence is best to maximize value creation? The answer is complex and can be determined upon a number of factors. These factors include, but are not limited to: corporate purpose, history and culture. Furthermore the answer depends upon the reconciliation of multiple paradoxes of parenting advantage: Control versus Empowerment, Responsiveness versus Synergy, Portfolio versus Core Competence.

Book: Michael Goold and Andrew Campbell - Corporate-Level Strategy

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Strategic Business Plan for a Holding Company
How can I write a strategic business plan for a holding company that acts as a centralised unit and supervising reportin (...)
Create or Destroy Values?
In Campbell, A. 2003. The Role of the Parent Company. The Oxford Handbook of Strategy:
Campbell presents stand-alon (...)
🔥 NEW Global Managers in MNCs Should Occasionally Check Local Managers
Managing from a far, that in a nutshell is what is required from MNCs. However, even with regional mangers and country m (...)
Parenting Value versus Diversification by Shareholders
Any parenting value add must be considered in the context that business units will have additional costs and ultimately (...)
Relationship Parent and SBU's
The choice of parental value creation also determines what the relationship between the corporate centre and the SBU's w (...)

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Best Practices

The top-rated topics about the Parenting Advantage. Here you will find the most valuable ideas and practical suggestions.

Expert Tips

Advanced insights about the Parenting Advantage. Here you will find professional advices by experts.

Checklist of Parenting Possibilities

Parenting Best Practices, Corporate Strategy, Corporate Governance
In their article “Corporate Strategy: The quest for parenting advantage”, Goold and Campbell suggest following ten place (...)

Diversification Pitfalls

Things to Signal and Avoid when Diversifying
Diversification of businesses has in many cases resulted in success. An example is General Electric, a very large compan (...)

What is the Optimal Size for a Corporate Center?

Sizing the Corporate Center
In the HBR of April 2005 on the added value of corporate headquarters, Michael Goold and David Young have investigated w (...)

A Corporate Theory: Long-term Handhold and Guidance in Turbulent Times?

Inside-out Corporate Strategy, Corporate Visioning
According to Professor Todd Zenger, companies should focus less on competitive advantage (this isn't what really interes (...)

How a Corporate Center can impact the Strategies of its SBU's

Corporate Strategy, Business Unit Strategy, Corporate Governance
How can a Parent Company impact strategic decisions of its daughter companies? Some typical issues have been identified (...)

An important Notice about Parenting Value!

Corporate Strategy, Parenting, Corporate Governance
Please note that the 4 mentioned influences of a parent over its subsidiaries can all result in both a Creation of value (...)

What is the Best Location of a Corporate Center?

Corporate Geographic Strategy, Corporate Governance
A somewhat related issue is in what country the Corporate Center should be based. In an article called: "The Rise of C (...)

How can one Assess the Fit Between a Parent Company and its Businesses?

Corporate Strategy, Parenting, Corporate Governance
In HBR article named "Corporate strategy: the Quest for Parenting Advantage" (1995) Campbell and Goold extend their Corp (...)
Information Sources

Various sources of information regarding the Parenting Advantage. Here you will find powerpoints, videos, news, etc. to use in your own lectures and workshops.

Synergy Estimation

Spreadsheet to estimate the value of synergy in a merger. By Aswath Damodaran. (...)

Size, Structure and Performanc

Corporate Headquarters
Paper by David J. Collis, David Young and Michael Goold reports on a survey of the structure and staffing of over 600 co (...)

Definition, Differences and Relationships between Resources, Capabilities, Competencies and Core Competencies

Core Competencies
Javidan (1998) has made a great contribution to answering the question for the relationship / differences between resour (...)

Strategic and Portfolio Management and Corporate Organization

Diversification, Corporate Strategy, Portfolio Management, Corporate Center
Presentation about diversification including many graphs and figures for clarification. The presentation includes the fo (...)

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Compare with: Parenting Styles  |  Resource-Based View  |  Competitive Advantage  |  Core Competence  |  Centralization and Decentralization  |  BCG Matrix  |  Growth Phases  |  Distinctive Capabilities  |  Bricks and Clicks  |  Organizational Configurations  |  3C's  |  Acquisition Integration Approaches  |  Office of Strategy Management

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