Organizing large corporations along a few divisional lines has long been an effective way to groom managers for top jobs and to limit the number of direct reports the CEO has to keep track of. But for value-minded executives, those bulky divisions can obscure the performance of smaller units where value is actually created. In a big, complex division, the division and function heads often become the de facto decision makers about whether and where to invest and how to make trade-offs between long-term growth opportunities and short-term demands. A head of research and development might spy a promising new technology investment, but just as quickly look away when the broader demands of complying with the budget of that function come into view.

This organizational blind spot, often combined with an excessive focus on short-term earnings, can produce unfortunate results, in our experience. Managers end up optimizing earnings goals at the expense of long-term growth and value creation. “We typically spend 80 percent of our time figuring out how to squeeze the economics, and only 20 percent on actual strategy, without numbers to back our decisions,” says one executive. Some readily admit to cutting back on value-creating projects in order...