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Statement of DirectionView Template for: SHU Statement of Direction The horizontal unit strategy or statement of direction explains how this centralized unit will guide its policies and perform its activities consistent with the goals and objectives of the SBUs it supports. The goal of the horizontal unit is to perform one or more activities for two or more businesses in a manner that maximizes the overall return of the group. In some cases this can be different than maximizing the return of each SBU. In practice, if all SBUs have the same objectives in terms of how a particular activity is performed, the horizontal unit has little confusion regarding its objectives. The mission becomes a relatively straight forward task of performing its specialized activity in the best manner possible in the context of the clearly stated business objectives. It may be to perform the activity at the lowest cost, or it may be to perform the activity better than the competition along some dimension. For example, all of the business unit managers might request that the centralized telephone customer service be staffed 24-hours a day with the most knowledgeable and the most courteous people in the industry, even though it may cost a little extra, in order to support their common strategy of superior customer service. If, on the other hand, the SBUs have different or even conflicting objectives or requirements for the performance of a given activity, then the horizontal unit manager must work to refine one or more SBU strategies in order to maximize the group's performance. Using the previous example, what if the strategy of several of the business units is to keep customer service costs extremely low because it is not a priority with their customers and the profit margins can't support more than a basic service? Decisions regarding staffing and training become more complicated and more difficult - especially when one business manager wants to fire the customer service staff and replace them with the latest in sophisticated `expert systems' for a totally automated customer service environment. The conflict in objectives requires a discussion with the SBU managers involved, and possibly with executive management, to ensure that the group's interests are paramount to the goals of any one SBU. For horizontal units that perform more than one strategically significant activity, it is important to analyze each activity independently. The big picture is that the horizontal unit's goals and plans should be dictated by the needs and the strategies of the SBUs. One of the reasons why many business units are frustrated with the support (and charges) they receive from the horizontal units is because many horizontal units adhere to a different goal. That is, the goal to seek the maximum budget increase possible in order to perform their specialized activities in the best manner possible. The rub is that the horizontal unit manager cannot make the necessary trade-off decisions between spending an extra dollar on one activity versus spending an extra dollar on another activity versus not spending the extra dollar at all. (Only the SBU manager can make those decisions based upon the objectives and strategies of the business within the context of the industry dynamics.) For example, what information systems professional doesn't want the newest computers and the latest software on the market? The question should not be, "Is new technology A better than current technology B?" The question should be, "What is the best technology to meet the needs and objectives of the business units served based on their current strategies, their current strategic positions, and their current financial condition?" |
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