Managing the Right Tension.
By: Dodd, Dominic, Favaro, Ken,
Harvard Business Review,
Dec 2006, Vol. 84, Issue 12
Profitability or growth? Short term or long? Synergy or stand-alone unit performance? All companies struggle to reconcile these tensions. But in any given company, one is more important than the others – and that's the one to manage.
Our research shows that most companies struggle to succeed in managing the three tensions. Between 1983 and 2003, only 38% of the companies we studied achieved both positive profitability and real revenue growth in the same year more often than they failed to do so. On the short-term/long-term tension, the results were little better: In a typical year, only 44% of companies grew earnings over the previous year while also being on the path toward economic profit growth over the next five years. Finally, we found that fewer than 45% of companies were able to add value to their divisions and business units through both synergy and improving stand-alone performance at the same time.
But no matter how difficult it is to do, working hard to strengthen the common bond in your company's lead tension is the only truly reliable route to improving performance for all your stakeholders.
Dominic Dodd (firstname.lastname@example.org) is a director of Marakon Associates, an international management consulting firm headquartered in New York and London. Ken Favaro (email@example.com) is Marakon's cochairman and was recently the firm's chief executive. They are the authors of The Three Tensions: Winning the Struggle to Perform Without Compromise (Jossey-Bass, forthcoming).