Around the world, companies are redefining the role of their headquarters, which includes turning corporate centers into key drivers of operations. Furthermore, they are increasingly assuming functions that go beyond representation, management and governance. These are the findings of the "Corporate Headquarters" survey conducted by Roland Berger among 86 global companies based in Western Europe.
"Corporate headquarters are growing in size and are managing increasingly complex systems within the group," says Tim Zimmermann, Partner at Roland Berger Strategy Consultants.
Roughly 80% of the companies surveyed plan to keep their headquarters in Western Europe. HQ is to become a business partner for global operations for more than half of these companies. Western Europe remains an attractive location for HQs, even if the Asian markets are becoming more important for business.
A way out of the dilemma: Value added vs. costs
The cost of corporate headquarters is a significant burden. The average cost of headquarters ranges between 2% and almost 7% of sales, depending on management concept and industry cluster. At the same time, the financial resources available to headquarters are shrinking. "Companies can get out of this quandary only by demonstrating that their expensive headquarters are adding true value to operations around the globe," explains Fabian Huhle, co-author of the study. "In this way, headquarters can justify the importance of their functions and costs."
The findings of the Corporate Headquarters study show that besides traditional tasks such as finance, accounting and controlling, HQ must focus more heavily on 5 key capabilities: providing strategic direction, managing complexity, driving innovation, working in global networks and ensuring the execution of actions worldwide. If headquarters can successfully provide these services, they can avert conglomerate discount and contribute real value.
The new trend is to make headquarters more international
Instead of relocating HQ abroad, Western European companies prefer to make their headquarters more international: "We've been observing this trend for several years now: Companies are consolidating key management functions at their headquarters," says Zimmermann. "What's also new, though, is the trend to make HQ more international to better support international operations."
Almost 60% of the companies surveyed believe that their headquarters must become more international – through cross-border projects for example. Furthermore, key people are being transferred to HQ from other countries. Virtual management and communications tools, as well as flexible project and committee structures, are also becoming more common at headquarters. These enable companies with locations around the world to work together more efficiently in a close network. 53% of the groups expect more activity in this area.
Focus remains on outsourcing and bundling internal services
Companies are outsourcing certain services to keep the high costs of Western headquarters in check. 30% of those surveyed intend to outsource IT, bookkeeping and HR functions in particular to external providers. This means the companies remain on the same outsourcing level as in 2010. About half of the companies use shared service centers for their global networks to cut costs. So far, 80% of these centers are located in Europe. "However, we expect relocation of these shared service centers will rise from 4% currently to 10% by 2020," predicts Fabian Huhle.
