The greatest challenge of business: Both/And thinking.
Wildflowers? Or redwoods?
Best to plant both.
As I think I’ve remarked before, Jack Welch once said that the greatest challenge of management — the very thing that makes it hard to pull off — is that you always have to manage for the long term and the short term at the same time. Typically, this takes the form of needing to hit this quarter’s numbers while also building your business for the future, two and five and ten years down the line.
It’s the same sort of challenge that has faced farmers since the dawn of agriculture: how do you grow enough food this year — whether to feed your family or pay the note on your farm — while also leaving the fields fertile for years to come?
To my mind, this challenge continues to get harder, not easier, as more factors that once were considered externalities enter into our business calculus:
- How do we keep turning profits while also holding ourselves to higher ecological standards? This is a live question whether you choose those standards for yourself or have them thrust upon you by regulation.
- How do we keep costs down while facing energy costs that aren’t just higher, but might be permanently higher?
- How do we get the most out our people this week, this month, and this year, while also remaining an employer of choice through more flexible workplace practices?
- How can we accommodate the realities of an economic downturn while laying the groundwork for future growth?
What questions would you add to this mix?
And what answers would you offer?
~
(Wildflower photo by StuSeeger; redwood photo by JSilver.)
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I’d add – how do you build up a workforce for the future, when you can’t afford to hire anyone right now? In craft labor fields in particular, employers are very focused on who/what they need right now, but then when there’s a big boom and they need more workers, they’re not available.
One of biggest existing and proliferating challenges in global business is managing a more complex and volatile geopolitical environment. Major corporations domiciled in the US, Japanese, and Western Europe are more reliant than ever on emerging markets to create sustainable growth. The luxury of relying on a handful of major markets with relatively stable political systems to create vast growth is a thing of the past. This uncertainty will probably yield higher risks for behemoths and force the leaders of global commerce to take on an even more entrepreneurial approach to create enterprise value.
Jessica — You’re right. The issue extends into other directions when we think about investing for the future versus controlling costs (etc.) now. A classic case: how do capital-intensive businesses (car makers, airlines, oil companies, chip makers, etc.) plan for the future when they’re not sure what the future holds. You *must* invest in advance, but it implies risk. To my mind, these classic challenges are only getting *more* challenging in today’s economy. Which leads me to . . .
Ed — Good points. Some companies have already seen the light; the smart ones are helping build the economies of the developing world, and profiting plenty from the work they’re doing there. But it requires foresight, advance investment, and an willingness to learn one set after another of cultural practices.
As a footnote to that last point: my historical research into the oil industry in the 20th century reveals just how savvy the oil majors were with marketing in every corner of the world. We think of the big petroleum markets as being synonymous with the industrialized world – North America, Europe – esp. after WW2 when the continent shifted its energy mix away from coal and toward petroleum – Japan between the World Wars, and so on. But Standard Oil was marketing kerosene lamps in southern China and southeast Asia a hundred years ago, and Mobil was selling penny jars of kerosene in Nigeria decades before that country started to industrialize in earnest.
In a sense, there’s nothing new under the sun. But the daily economic news reminds us of just how intense these trends are today.
This is at its core a measurement and a compensation problem. Performance to the month, quarter and year can be measured accurately. Executive compensation is based on those measurements.
It’s much harder to measure and compensate for future impact. Options and other elements of a compensation package are supposed to be a proxy for that, but can create incentive for the executive version of the pump’n'dump.
Until we can measure future impact in the present and compensate appropriately, executives who build long-lasting companies will be fundamentally altruistic. They’ll be rare, courageous people who are more motivated by the need to have a lasting impact than by the need to max out their compensation package.
Russ — I think you’re onto something MAJOR here. Now that I mull on it, it seems like one of the corollaries of “What gets measured, gets done.”
Tim and commenters: another excellent post that pays nicely with the Yin/Yang of the Hilbert questions. In addition to my suggestion therein that THE core problem is organosclerosis I’d pair this post’s implications. The trick is to balance the multiple points of emphasis, i.e. finding the balance between strategy and execution, and doing so in a way that balances today and tomorrow. One could think of it as a matrix with the key elements as rows and the today/tomorrow as columns. And “sailing this boat” has to be done in a dramatically shifting and re-structuring environment…many perfect storms coming together perhaps ?
Central to all this is adaptation, innovation and adoption and resilience. Which comes home to roost in the management and control system, especially including the measurement & compensation mechanisms. People do what you pay them for and if you mis-measure they’ll find the loopholes.
As an example of an application of this kind of thinking consider this strategic assessment of Citi’s new strategic plan: http://tinyurl.com/5zy8tb
And, FWIW, consider this sketch of a blueprint for some rudimentary thinking on how to go about it:
http://tinyurl.com/586u6y
Keep up the good posts please and the value-adding comments.
[...] I’m really talking about is Both/And thinking. And Michael’s absolutely right to guess that some entrepreneur is going to perfect a both/and [...]