Move guide
For groups: run the portfolio review
This move guide is for a business that owns more than one business. Your report suggested a move on at least one of the group practices. Which ones depends on your answer to "Does head office shape the businesses' strategies?"
Each business gets a role the board has agreed, and a written reason the group should own it. Then capital, senior time and the centre's cost follow the roles.
1. When it applies
Use this move guide if your report placed any of the group practices in the lowest two stages.
Every group answers these two.
| Practice | Where it may sit today | Where this move guide aims |
|---|---|---|
| Whether each business has a stated role on a stated test | Lagging: "Every business in the group is a growth priority, nobody has scored them side by side, and the last one sold was sold because a buyer turned up." Basic: "Leaders can say which businesses are the future and which are not, and there may be a scoring on file, but no business has a role the board has agreed, and the annual plan funds them all the same way." |
Competent: "Each business has been scored on how attractive its market is and how strong its position, and has a stated role (grow, fix, hold for cash, exit) the board has agreed." |
| Whether each business is better off in this group than it would be with any other owner | Lagging: "The businesses are in the group because they always have been, and 'we bought it years ago' is the whole reason." Basic: "Synergies are claimed, and may be counted for the group as a whole, but nobody has written down business by business what the group adds, and whether another owner would do better has not been answered." |
Competent: "For each business the group has written down what it adds that a standalone owner or a rival parent could not (shared customers, skills, assets or capital), with a number where one exists." |
If head office shapes the businesses' strategies.
| Practice | Where it may sit today | Where this move guide aims |
|---|---|---|
| Whether capital and senior time follow the portfolio choices | Lagging: "Each business gets last year's capital give or take, the biggest business gets the most attention because it is the biggest, and the growth business waits its turn." Basic: "Capital goes business by business to whatever wins the budget round or clears the hurdle, and no business is meant to be a net source or a net user of cash." |
Competent: "The plan allocates capital and the leadership's time from the portfolio roles, naming which businesses are meant to be net sources of cash and which net users." |
| Whether the group can say what the centre adds and what it costs | Lagging: "The centre is a cost the businesses pay for and complain about, and nobody can say what it does that a bank and an accountant could not." Basic: "The centre's value is described as 'oversight' and 'shared services', and no business has ever been asked whether it would pay for either." |
Competent: "The centre has a written list of what it does for the businesses (appointing and challenging their leaders, linking them, shared services, deals) with its total cost, and the businesses have seen it." |
| Whether the businesses' strategies nest under the group's | Lagging: "The group strategy is the business-unit plans stapled together with a cover page, and a unit's plan could belong to any parent." Basic: "There is a group strategy page, but it sets financial targets or a cost programme rather than where the group will compete, and the unit strategies are written to their own logic." |
Competent: "Each unit's strategy says where it competes and how it wins in terms that visibly follow from the group's choices, and the group page names what it will not own." |
If head office funds the businesses, appoints their leaders and sets targets, and they write their own strategies.
| Practice | Where it may sit today | Where this move guide aims |
|---|---|---|
| Whether capital goes where it earns its return, on a test every business knows | Lagging: "Each business keeps the cash it makes and spends it, and the centre sees the capital plan after it is committed." Basic: "The centre approves capital case by case, and its return test, written or not, gives way when it likes a request." |
Competent: "Every capital request, organic or acquisition, is judged on one written return test that every business knows." |
| Whether the centre does only what its role needs, at a cost to match | Lagging: "The centre calls itself hands-off, but it reviews decisions the businesses are paid to make." Basic: "The centre's cost or headcount is known as one number, but nobody has set it against the jobs the centre does." |
Competent: "The centre's jobs are written down (appoint the leaders, set the return test, decide what to keep or sell, report to the owners), with what the centre costs or how many people it employs." |
If every practice your report asked about already sits at the middle stage or higher, skip this move guide.
Each business still runs its own strategy through steps 1 to 8, starting with knowing your own numbers and your market.
2. What to do
Seven steps over six to eight weeks. Most of it is arithmetic the group already has.
Every group
- Score every business on two things, on one page: how attractive its market is, and how strong its position is. Give each a role the board signs: grow, fix, hold for cash, or exit. The portfolio-logic worksheet does this, and Table A below records it.
- For each business, write in one sentence what the group adds that a standalone owner or a rival parent could not. Where the sentence cannot be written, the business goes on the sale list. The natural-owner worksheet does this.
If head office shapes the businesses' strategies
- Argue next year's capital from the roles, instead of from each business's request. Show which businesses are meant to produce cash and which to use it. The capital-across-businesses worksheet does this.
- List what the centre does for each business, and cost each item. Ask the businesses which they would pay for, and close what nobody would. The centre-adds worksheet does this.
- Put the group's strategy on one page, including what it will not own. Have each unit write its own page underneath. The cohesion worksheet does this.
If the businesses write their own strategies
- Write the one return test every capital request must pass. Send it to every business, and judge next year's requests on it.
- List the few jobs the centre does, with what each costs. Hand every other decision and head-office job back to the businesses.
The five free worksheets do the recording:
- /worksheets/strategy/portfolio-logic for the scores and the roles;
- /worksheets/strategy/natural-owner for what the group adds;
- /worksheets/strategy/capital-across-businesses for capital from the roles;
- /worksheets/strategy/centre-adds for the centre's list and its cost;
- /worksheets/strategy/cohesion for the group page and the unit pages.
3. What to produce
One table, plus the worksheets above.
Table A. The portfolio on one page
| Business | Market attractiveness (1 to 4) | Strength of position (1 to 4) | Role the board signed | What the group adds, in one sentence | Meant to produce or use cash |
|---|---|---|---|---|---|
A business with an empty fifth column goes on the sale list.
4. A worked example
Illustrative. Written for this move guide. It describes no client.
A family-owned group has four businesses: a builders' merchant, a transport company, a commercial property portfolio and a small software firm. Head office shapes the businesses' strategies.
The scores and roles.
- The merchant scored well on both and got the role "grow". The transport company scored low on its market and got "hold for cash".
- The property portfolio got "hold for cash". The software firm got "fix".
What the group adds.
- The group could write its sentence for three businesses. The merchant and the transport company share customers and a fleet, and the property portfolio holds their sites.
- Nobody could write one for the software firm. It went on the sale list.
The capital and the centre.
- Next year's capital went first to the merchant. The transport company and the property portfolio were named as the sources of cash.
- The centre listed eleven things it did. The businesses said they would pay for seven. The other four stopped.
Eight weeks on.
- 4 of 4 businesses with a signed role
- 1 business on the sale list
- 4 centre services stopped
On a retake, the five practices for its kind of group could be answered at the middle stage.
What it looked like in our work
From our own work. Redrawn, figures changed.
A consumer goods group scored each of its businesses on two things: how attractive its market was, and how strong its position was. Each was scored out of four.
| Business | Market growth | Profitability | Top-three share | Market score | Position score |
|---|---|---|---|---|---|
| A | 3% | High | 68% | 3 | 4 |
| B | 18% | High | 75% | 2 | 4 |
| C | 2% | High | 60% | 3 | 1 |
| D | -1% | High | 70% | 3 | 2 |
| E | 3% | Low to medium | 40% | 3 | 1 |
| F | -2% | Low | 72% | 2 | 3 |
| G | 7% | Medium | 80% | 2 | 2 |
| H | 0% | Low | 52% | 1 | 4 |
A score of 3 or 4 counts as attractive, or as strong.
The scores placed each business in a corner. Each corner points to one of the roles in step 1.
A standard tool: the growth-share matrix
A generic diagram in our own words. The idea is the Boston Consulting Group's.
A second classic grid sets each business's market growth against its share relative to the leader. Use it to start the conversation about roles.
After the Boston Consulting Group. The grid starts the conversation. The roles still need the board's judgement.
5. Effort and dependencies
- Group chief executiveRuns the review and writes the owner sentences.
- Chief financial officerDoes the scoring arithmetic and the capital plan.
- BoardSigns each business's role.
- Business headsSay which centre services they would pay for.
What you need
- Each business's market and profit figures, as the group already reports them.
- The centre's costs, item by item.
How long
- Six to eight weeks.
What gets in the way
- Funding every business the same way. A group that does it cannot tell which businesses another owner would run better.
6. How will you know it worked?
The test is whether next year's capital plan reads the roles. Retake the check after the next capital round. Each of these should be true for the practices your report asked about:
| Practice | You can answer Competent when | A document alone does not count if |
|---|---|---|
| Whether each business has a stated role | Each business is scored on its market and its position, and has a role the board has agreed. | The scoring is on file, but the plan funds every business the same way. |
| Whether each business is better off in this group | For each business, the group has written down what it adds that another owner could not. | The synergies are counted for the group as a whole only. |
| Whether capital and senior time follow the choices | The plan sets capital and leadership time from the roles, and names the net sources and users of cash. | Capital still goes to whatever wins the budget round. |
| Whether the group can say what the centre adds | The centre has a written list of what it does, with its total cost, and the businesses have seen it. | The list exists, but the businesses have never been asked about it. |
| Whether the businesses' strategies nest under the group's | Each unit's strategy follows from the group's choices, and the group page names what it will not own. | The group page sets only financial targets. |
| Whether capital goes where it earns its return | Every capital request is judged on one written return test that every business knows. | The test gives way when the centre likes a request. |
| Whether the centre does only what its role needs | The centre's jobs are written down, with what it costs or how many people it employs. | The cost is known as one number, set against nothing. |
The worked example is illustrative.
Think we've used your work without proper credit? Tell us and we'll fix it.