HBR's Managing the Right Tension

 

In the December 2006 issue of Harvard Business Review, authors Dominic Dodd and Ken Favaro describe "The Three Tensions Every Company Faces" as Profitability vs. Growth, Short Term vs. Long Term, and Whole vs. Parts.  Rather than shifting or swinging between each extreme of these spectrums, they describe ways to balance the tensions and to choose which tension is the most important for a company to focus on.  Most of the small business owners I know tend to focus on the Profitability vs. Growth tension, with an entrepreneurial bias towards Growth.  I've been there myself.

 

Then comes the natural result of over-focus on Growth which is that the cash runs out.  Suddenly, it's "all hands on deck" for an emergency focus on Profitability.  Then the danger is that the new focus on Profitability leads to major cuts in the elements that are key to the company's culture or long term growth plans.  You get the picture.

 

The other part of the article that I really liked was the section on The Dangers of Picking Lead Objectives.  Good stuff here, especially on "The tying-costs-to-earnings trap" and "The annual-earning-growth trap" where some very typical pitfalls are described.

 

How will your organization balance between the tensions, choose the best tensions and avoid common pitfalls?