Formulating policy with a parallel organization: how a CEO integrated independent divisions

Purpose – Division managers in multi‐division, production organizations often focus primarily on their division's interests and goals and as a result may not be well motivated or equipped to formulate optimal, company‐wide policies. In this case study, a new CEO decided to deal with ambiguous, company‐wide policy issues such as pricing, product portfolios, market position, and communication across independent divisions, by installing a parallel organization composed entirely of line managers from different divisions and functions. This paper aims to examine the parallel organization concept and how it was applied, installed and operated to greatly benefit the firm. Design/methodology/approach – The case describes the operation and outputs of the parallel organization based on data gathered from interviews of managers and detailed analysis of proposed issues and policies formulated over a five‐year period. Findings – The firm's performance improved significantly as the parallel organization generated policies for costing and pricing products, removing products from the product line, positioning in global markets, and enhancing strategic planning. In addition, the parallel organization sharpened management's analytic and decision skills. Research limitations/implications – The accuracy of the data and its interpretation and analysis was reviewed and confirmed by management. Practical implications – This case shows how using a parallel organization, in place of the common practice of staff analysis or consultant investigation, can improve a firm's critical policies, profitability, and orientation to its future environment while better integrating independent divisions. Originality/value – This is a unique, in‐depth examination of the design and operation of a parallel organization to achieve strategic policy changes and improved communication in a multi‐division firm.