nursing

1- Directive and Evaluative Influence of HQ

The HQ of an organization consists of the place where a company is run and its operations are directed. There are 4 different ways by which HQ can influence the underlying businesses, divided in 2 dimensions: One dimension represents the relationship between HQ and its underlying businesses. The second dimension represents the relationship that HQ encourages between those underlying businesses itselves. The first dimension is divided into Directive or Evaluative. In a directive control relationship, HQ is closely involved in all the businesses' strategic decisions. Whereas, in a evaluative control environment, HQ gives its businesses the autonomy to make their own strategic decisions. HQ just evaluates their decisions from time to time to make sure the business stays in line with their values and financial goals. We found this concept to be important because knowing which relationship an HQ wants to follow can dictate how involved they are in the processes and activities of their underlying businesses. This in turn will allow for better decision making due to the clear cut mission and vision of the HQ.

2- Standalone and Linkage Influence of HQ

The second dimension of influence that HQ can have consists of the relationship it encourages between its businesses. These relationships can be either Standalone and Linkage. A standalone style of HQ does not promote any linkage between the different businesses. This happens when the underlying businesses independently benefit from the relationship with HQ. Much of the synergies that exist between these underlying businesses occur towards the origin of the value chains and are therefore difficult to observe from an outside perspective. One example is P&G. Being a house of brands, P&G serves solely as an umbrella for many different and independent companies. On the other hand, a Linkage style of HQ encourages the underlying businesses to connect with each other. In this case, HQ is just a supervisor overseeing their businesses and its influence is felt through the relationship between these businesses. One example is Gillete. Even though it has many different brands and products, Gillete still encourages the interactions between its underlying businesses. Similar to before, we found it important for firms to understand the different type of relationships in horizontal influences so that they may better allocate energy and resources to their underlying businesses; knowing whether a firm’s underlying businesses are thoroughly linked together, or if they simply share synergies early on in their respective value chains can prove useful when allocating resources amongst them.

3 - Challenges in Resource Allocation by the HQ

There are two challenges that HQ’s encounter when allocating their resources, which are the challenges of synergy and uncertainty. The challenge of synergy can be best described as businesses in a multi-business organization who are not independent of each other, but still interact with each other. Therefore, a firm must understand these interrelationships and how they might affect resource allocation: will giving one business extra resources take away value from the second business as is the case when dis-synergies exist, or will providing resources to one business help uplift the second one as well? The challenge of uncertainty is arguably more complex due to the existence of fundamental uncertainty (when one is unaware of both the future or the possibility of potential outcomes) and uncertainty derived from financial theories when one does not know the future but is in fact aware of the possibility of potential outcomes. This duality of theories quite accurately mimics the duality of man in which there exists both a state of good and bad simultaneously in every individual, constantly at war with each other. Thus, businesses face the obstacle of assessing the synergies that exist between businesses as well as determining which businesses make the best investments for the risk that they pose (aka exploration-exploitation trade off). This is important because recognizing and addressing these challenges will guide resource allocation and decision on how to spread investment across a portfolio of businesses as well as whether or not to invest in a particular business.