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Corporate Hierarchy is not equal to Planning HierarchyIdentifying the businesses in which the company competes is almost always different than looking at the company's legal structure or organization chart. Rarely are companies organized by strategically relevant business units. Even companies that say they are organized around Strategic Business Units (SBUs) often are not. Especially in information services and financial services companies, these organizational entities called "SBUs" are often many businesses lumped together. They are not distinct, strategically relevant, business units. The reason these pseudo SBUs exist is often to simplify financial reporting or to satisfy human resource management which often prefers that all `SBU Managers' have a relatively equal budget and staff. Many large organizations are really engaged in departmental planning and the planning process is destined to failure from the beginning. Business unit planning, not departmental planning, is the starting point for any successful planning process. It is possible for a company to reorganize twice a year without entering a new business or exiting an old business. A business can have fewer than ten people, or more than 10,000. The number of people is not relevant. In short, a company does not have to be organized by SBU, but it should know specifically what strategic businesses it has. |
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