Inside Modern Giants
This research focuses on the leadership of large, complex firms--'modern giants'--companies of billions of dollars in revenues and tens of thousands of employees. Our interest lies in describing how the corporate center and senior management teams of large companies with a demonstrated capacity to earn their cost of capital and grow their earnings faster than their direct competitors actually influence such corporate performance. Very large companies face three special challenges in achieving superior performance: the 'large numbers' problem affecting top line growth rates, the 'diminshing returns' problem affecting economic returns, and a 'governance and control' problem known in the economics literature as the 'agency problem.' Our research address each of these challenges by focusing on two critical top management activities. The first is promoting innovation and growththat is, finding ways to generate and exploit more new profit opportunities from the collective whole than that available from the various business properties as separately owned and managed entities. The second critical activity involves exercising effective coordination and control of existing operationsthat is, ensuring that the value of the enterprise as a whole is greater than the simple summing of its parts. The first activity places top management teams in an entrepreneurial role. The second places the corporate center in a custodial or trusteeship role. Some leaders and their teams are successful at meeting these somewhat conflicting challenges (and living two quite different roles simultaneously), while others are not. How can we explain the differences in meeting these challenges?
We believe that explaining these differences, and coming to an understanding of what makes modern giants more or less effective as organizations, requires a detailed grasp of how their leaders design and use management processes to guide individual and collective action. Using a sample of six to ten U.S. and non-U.S. companies, our goal is to understand what constitutes core management processes for successful modern giants, how and why they vary both within and across firms, how they evolve over time, and how the resulting variety of core processes within large firms are managed.