Look for these common indicators
Corporate linkages are the defined relationships between different businesses or entities within a corporate hierarchy. A linkage is traditionally established when one member of the family has a proven legal or financial responsibility to another member of the family. Hierarchy data practitioners fondly refer to this as the parent-child relationship or the corporate family tree.
Backbone of Your Customer Master
Your master data is only as good as the relationships it provides. Hierarchies connect all customer master data. Understanding the organizational hierarchy, or corporate family tree, is one of the core principles of a sound enterprise data strategy. In account-based marketing, one needs to link contact records to their appropriate organization and the correct segment of that organization in order to precisely execute account driven engagement strategies. Go-to-market strategies require clear articulation of the commercial view of the customer in order to pair customers and prospects with the best solutions. And, of course, it would arguably be impossible to perform a balance of trade analysis without accurate corporate family trees. Hence, hierarchy is a crucial part of any organization’s account-based everything strategies or Customer Data Platform (CDP) solutions.
Linkage hierarchy assets are dynamic by nature. They provide a representation of how organizations are related based on several factors. Examples of these relationships include legal relationships (such as greater than 50% ownership), franchisor-franchisee, and dealers. When a merger, acquisition, or divestiture occurs or a business opens or closes, hierarchy linkages inherently change. Complexities arise when internal transformations like this happen. Some changes are internal and unique to your organization and could affect your application of corporate family insights such as a shift toward selling strategies (i.e.: channel vs. direct selling). Will your organization continue to target the smaller companies or shift your attentions to the global headquarters that own and operate them?
Four indicators that it’s time to reassess your linkage hierarchy assets:
1. You’re seeing a rise in manual work. Yes, there is a place for manual work within hierarchy data management. However, any such manual work needs to be justified in terms of value, it needs to scale, and it should be guided by policy. What we’re talking about here is the rate of increase of manual work that goes around established rules and policies to help drive business. Not only does this make your data management efforts unscalable, but your data could in time also lose quality. An increase in manual work could mean that there is a shift in the business and data operations. Evaluate whether your customer master hierarchy definition still meets your current needs.
2. You are increasing business with franchisees, agencies, dealerships, etc. Most traditional family trees use legal and financial responsibilities to determine linkage. Certain entity relationships are required for organizations and businesses to operate. Imagine your company performs services for restaurant outlets that are predominantly franchises and you want to aggregate and group them by specific brand-oriented business (e.g., McDonald’s, Burger King). Because the legal ownership of franchises and dealerships is different from the brands they carry, the representation of the brand-oriented business you’re servicing could be fragmented.
Metrics such as new logos, total addressable market, share of wallet, or balance of trade lose accuracy with a strict corporate legal linkage model based on majority ownership when your commercial view includes franchises and dealerships. It would be imperative to either add these types of alternative ownership (i.e. minority ownership and association) scenarios to their linkage hierarchy assets or perform manual overrides. Otherwise, ABX efforts will fall short of expectations.
3. You have a rising number of orphan entities. Orphan entities are organizations or businesses in your customer master that have neither a parent nor a child relationship. These are also known as stand-alone entities. Here are a few reasons why these occur:
- The entity is operating independently.
- There is no legal/financial relationship greater than 50% established between an orphan entity and others in the family tree.
- The orphan entity has been established as out of business and therefore has no present legal linkage with other family trees.
- There’s not enough market data to make a decision to link a stand-alone entity to an existing family tree.
An increasing number of orphan sites for which your business activities suggest relationships to other noted hierarchy trees may be an indicator that you need to review your current hierarchy operations and strategies. The four bulleted reasons above will contribute to the fragmentation of your customer base, which could make account assignment and planning more complicated.
The danger of a rising number of orphan sites goes beyond the fragmentation of customer aggregation in reporting. Because of this, the ability to measure growth of your client family will fall short when your hierarchy solution are unable to bring together sites that are linked but may not meet the majority ownership rule. Having a referential data source that can show alternative or potential linkages through sustainable models and algorithms could help you see the bigger picture of relationships beyond legal ownership.
4. You hear terms like “Super Global Ultimate”. Ideally, a customer entity in your customer master should ultimately link up to a global headquarters. As an example, all the customer entities you interact with that are owned and managed by McDonald’s should roll up to the global headquarters in Chicago. In most cases, the legal relationship can provide you this Global Ultimate (GU). What happens if your organization needs to group entities beyond legal and financial responsibilities, such as those that are under minority ownership, foundations, or franchises, to roll under that same GU?
There are a few coined terms for this, such as “the true customer,” “the umbrella organization,” and “the commercial ultimate.” However, the most common one is “Super Global Ultimate.” Regardless of the term, they all suggest that your definition of a commercial view of your customers goes beyond the legal view or the GU. This becomes a hindrance when your organization is grouping organizations with entities falling under these extended relationships.
Your customer master hierarchy strategy is not constant. It will need to continuously evolve with your organization’s business goals. Understanding how your business might need to coalesce entities into recognizable customer groups is an important step in defining what you need to formulate a strategy. Whether you are establishing a customer hierarchy initiative for the first time or fine-tuning an existing operation, use the indicators above to help guide you to the best hierarchy activation strategy that could bring faster time-to-value to your stakeholders, leading your hierarchy data to become an asset.
For further insights on the topic of linkage hierarchy, please refer to this article and white paper from Dun & Bradstreet.