Imperialist Syndrome

Definition

A strategic pathology where growth-driven organizations become addicted to expansion and acquisition, overtaxing resources by expanding into businesses they do not understand. Success at diversification creates momentum toward empire-building that exceeds organizational capacity. The organization's executive function becomes paralyzed by complexity.

Diagnostic Criteria

1. Organization has history of successful growth through acquisition
2. Diversification has moved far from core competencies
3. Control systems cannot keep pace with organizational complexity
4. Financial/accounting culture dominates over operational substance
5. Division managers spend majority of time on head office compliance

Symptoms

• Acquisitions in unfamiliar industries
• Debt levels becoming unwieldy
• Control systems overloaded by complexity
• Head office meddling in divisional details
• Political games between controllers and divisions
• Neglected product lines becoming stale
• Corporate culture worshipping growth above all
• Substance of business lost in financial abstractions

Risk Factors

• History of successful acquisitions
• Entrepreneurial CEO with empire-building ambitions
• Powerful financial/planning staff
• Sophisticated control systems creating false confidence
• Success that reinforces diversification strategy

References