Empire Building

What Is Empire Building?

Empire building is the act of attempting to increase the size and scope of an individual or organization's power and influence.

Empire building can also occur in the larger public arena when corporations take steps to acquire competitors or other firms that might offer downstream or upstream integration or other synergies.

A corporation might attempt to control a larger market share or form a conglomerate to branch into other industries in an attempt to grow the corporation's influence, assets under control, and influence.

How Empire Building Works

Empire building is typically seen as unhealthy for a corporation, as managers will often become more concerned with acquiring greater resource control than with optimally allocating resources.

Corporate controls imposed by a company's board and upper-level management are supposed to prevent empire-building within a corporation's ranks.

On a larger scale, it may lead to acquisitions or other decisions that do not ultimately benefit shareholders, increase the corporation's financial health, or bolster the company's long-term viability.

Economists refer to this potential conflict of interests between management and shareholders as an agency cost.

The failure to screen out empire builders can lead to corporate actions that do not necessarily provide the best growth opportunities for a corporation and its shareholders, such as acquisitions made to boost the control of the company's executives.

Empire Building Strategies

Empire building can be done through a variety of strategies. Let's take a look at a few of the main methods.

Mergers and acquisitions. Growth-through-acquisition is, by far, the most commonly used strategy of empire building. There's no easier way to quickly grow the size and scope of your company than simply gobbling up other companies. Of course, this strategy is fraught with risk as "serial acquirer" leadership teams often overpay and/or get into industries that simply don't fit.

In the 1870s, Andrew Carnegie used vertical integration as one of his main strategies to build a massive iron and steel empire.

Advantages and Disadvantages of Empire Building

From the perspective of empire-building leadership, empire-building can maximize both job security and promotability. Finally, empire-building can increase prestige for both the company and empire builders.

Advantages of Empire Building

Disadvantages of Empire Building

Example of Empire Building

For example, if Bob is a middle manager at XYZ Company and begins to hire large amounts of personnel and launch projects that increase his influence over other departments at XYZ Company, Bob could be seen as an intra-company empire builder.

The added expense of additional employee salaries and the spending required to launch the projects may hurt Company XYZ in the name of Bob increasing his own personal influence and profile within the company. This desire creates a principal-agent problem that can ultimately undermine the success of the company.

This term should not be confused with the landmark, the Empire State Building.

Empire Building FAQs

What Is a Family Empire?

A family empire is a large company or enterprise that is primarily controlled by a single-family. Famous family empires in history include the Waltons (Walmart), the Mars family (Mars chocolate), and the Thomsons (Thomson Reuters).

What Are the Building Blocks of an Empire?

Five main building blocks of an empire include strong leadership, a sound financial position, practical strategies, effective resource allocation, and strong risk management protocols.

How Does Empire Building Relate to the Pyramid of Bureaucracy?

Generally speaking, a bureaucratic organization is shaped like a pyramid, with the president and/or CEO at the very top. Vice presidents report the president/CEO, managers report the vice presidents, and so on.

The concept is related to empire-building as people often become more concerned with acquiring greater resource control (growing the layers of the pyramid "beneath" them) than with being efficient.