UK: EDITORIAL - WHAT PUTS THE BUZZ INTO BUSINESSES.

UK: EDITORIAL - WHAT PUTS THE BUZZ INTO BUSINESSES. - Large businesses often get tired and lose their way. C. Northcote Parkinson (of Parkinson's Law fame) called it 'Injelititis - or Palsied Paralysis', and noted that in its later stages it was inoperab

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Last Updated: 31 Aug 2010

Large businesses often get tired and lose their way. C. Northcote Parkinson (of Parkinson's Law fame) called it 'Injelititis - or Palsied Paralysis', and noted that in its later stages it was inoperable. The most common therapy nowadays is to change the management or attempt to change the corporate culture (or possibly both). Neither treatment is very effective. As Warren Buffet ruefully noted, when a management with a reputation for brilliance tackles a business with a reputation for bad economics, it's the reputation of the business that remains intact. Moreover the transformation of corporate culture has consistently proved an unrewarding and confusing objective which even the best management teams have found themselves unable to achieve.

Poorly performing businesses would do better to split themselves up: not to satisfy the City's current desire for focus, nor to offer up morsels that someone might buy at a premium price. It should be done to rediscover the verve and dynamism which is key to business success. Divested businesses, in their thousands, have achieved spectacular success because they have found an identity which was missing when they were part of something more cumbersome. The change in itself creates the buzz which good managers are constantly trying to generate.

A bust-up is more than a division into neater packages. The process of dividing into smaller parts should not stop until units emerge which have their own coherent set of business strengths and values. The process itself invigorates what remains of the parent (which should also benefit from retaining a significant shareholding in the offspring). The newly independent businesses can set off knowing that their corporate culture is sound, and a firm base for future growth. The bust-up of underperformers could be the cradle of a British Mittelstand.

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