Business Lessons from the Success & Failure Stories of Corporate Parenting | |

Executive Summary
The need and effectiveness of corporate parenting has been the center of numerous strategic decisions discussions for a multi-business organization for a long time now. The existence of a corporate parent, the management level which is directly not a part of consumer-facing and profit-making business units, carries a cost to the entire business. These costs that include corporate overheads due to mismatch in synergies among the SBUs, delays in decision processes etc., do not get strike out by any direct revenue streams of the business. Therefore, it becomes a necessity for a corporate parent to justify its existence as it looks to find reasoning to whether and how it adds value to the overall business and SBUs alike.
Corporate parent gives opportunity to develop lateral synergies across interrelated business units but of late these lateral relationships between businesses are often net negative rather than positive. It is also argued that most of these lateral synergies are present between independent businesses like GE. Values creations, Diversity, Leveraging resources across SBUs – Resource Stretching, are the strategic propositions that corporate parent boasts of bringing in to the overall organization. However, like in the case of Sears, Burns Philp, and most of the multi-business, there lie implicit and pervasive tendencies that contribute to unavoidable drag to the overall profitability and efficiency of the business by inherent excess diversification of the corporate parent. This leads to the widely accepted common belief of adding value not only through resource stretch but with ‘Resource Fit’ also, maintaining the idiosyncrasies of the individual SBUs in multi-business organization.

Introduction:
“Corporate Parenting is a philosophy that views a