Synopses & Reviews
This book tackles the central challenge of business leadership: to perform well on many fronts at the same time. In many companies, three pairs of performance objectives emerge as particularly difficult to achieve simultaneously: growing a company while improving its profitability; increasing short term earnings while also building for long term profits; and improving the performance of each part of the company while at the same time making the whole worth more than the sum of those parts. These are the three tensions of business leadership. This book is about achieving both ends of each tension more of the time.
But why is getting both so important? After all, most companies make choices of priority between performance objectives and most managers believe that the stock markets reward some types of performance much more than others (e.g. short term earnings). The authors' research has uncovered what really matters to the performance of a company in the stock markets: the companies with the highest returns for shareholders are the companies that achieve both ends of each tension more often.
The authors explain that most managers aren't managing the tensions effectively; the strongest tools currently being used are the bluntest, which means that they can only improve performance on one objective (e.g. short-term earnings) by hurting another (e.g. long-term profits). For example, diversification, setting a goal for market share, or creating a risk-taking culture may be powerful tools for stimulating growth, but all too often they hurt profitability. This explains why it is so hard to master each tension. Thisleadership conundrum explains the phenomenon of the corporate see-saw. Many companies get trapped into a vicious see-saw cycle: striving toward one objective, then reversing course to achieve its counterpart (e.g. from a growth strategy to a profitability strategy or from a focus on division performance to a focus on synergy across the whole).
Given this diagnosis, what can companies do to get better at doing both? Three concepts are critical to tackling the three tensions: A company's batting average: the proportion of years that the company manages to achieve both ends at the same time. A top baseball player might bat .300-.350; to be top quartile in overall performance for shareholders, a company needs to bat .450 or higher (achieving both in 4-5 years out of every 10). The standard of batting average can be applied to many of a leader’ s tools: measures, goals, incentives, criteria for promotion, and the expectations and shared beliefs in the company’ s culture. Smart tools are the opposite of blunt tools: they improve performance without creating collateral damage. While the concept is straightforward, achieving this goal is not at all simple. Context, how they are used, and how they are combined with other tools all play a part. The sweet spot of a tension is the point where it is easiest to hit both objectives at the same time. Some leaders have an instinct for where these sweet spots lie for their companies and direct company resources towards staying in them.
This book explores how companies can master and maintain these three critical factors to success.
Review
Every executive will immediately connect with the themes of this important new management book: the conflict between profitability and growth, the demands of the short term and the long term, the inevitable incompatibility of centralization and decentralization. But in
The Three Tensions (Jossey-Bass), consultants Dominic Dodd and Ken Favaro expose the false choices executives make in resolving these issues and the traps and cycles they fall into when they do. In many ways, this is a difficult book because of the stylized framework and vocabulary that the authors have created, and the absence of a single overarching idea such as "excellence" or "reengineering." But the essential insight -- that the solution to these "tensions" lies not in "balance" or "compromise" but in a relentless focus on customer benefit, sustainable earnings and cultural norms -- has the advantage of being both original and wise.
—S.P. (Washington Post, February 25, 2007)
Synopsis
A manager argued that he could either increase his business unit’ s margins or its sales, but not both. His chief executive reminded him of the time when people lived in mud huts and faced the stark choice between light and heat: punch a hole in the side of your hut and you let the daylight in but also the cold; block up all the openings and you stay warm but sit in darkness. The invention of glass made it possible to overcome the dilemma— to let in the light but not the cold. How then, he asked his manager, will you resolve your dilemma between no sales or no margin improvement? Where is the glass? — From the Introduction
Synopsis
--John Roberts, professor of economics, strategic management, and international business, Stanford Business School
Synopsis
A manager argued that he could either increase his business unit's margins or its sales, but not both. His chief executive reminded him of the time when people lived in mud huts and faced the stark choice between light and heat: punch a hole in the side of your hut and you let the daylight in but also the cold, or block up all the openings and you stay warm but sit in darkness. The invention of glass made it possible to overcome the dilemma—to let in the light but not the cold. How then, he asked his manager, will you resolve your dilemma between no sales or no margin improvement? Where is the glass?
—From the Introduction
"To win, leaders have to push their companies beyond trade-offs. They must find strong growth at premium returns, not one or the other. They must deliver great results today and build for the future at the same time, not push for earnings that can't be sustained. The Three Tensions is about having both at the same time, more of the time. I recommend it to any manager serious about winning."
—James Kilts, former chairman, CEO, and president, The Gillette Company
"Leadership can't be just about telling people what you expect of them. The Three Tensions sets out a range of helpful tactics leaders can adopt to really engage their people in the search for good performance on many fronts."
—Andrew Cosslett, chief executive, InterContinental Hotels Group PLC
"The Three Tensions speaks to fundamental management issues, perhaps the most fundamental. Managers looking for new ideas on how to improve performance will find it very stimulating. I found my own thinking very much influenced by it."
—John Roberts, professor of economics, strategic management, and international business, Stanford Business School
Synopsis
Profitability or growth? Results today or tomorrow? More synergy or better stand-alone performance? Ask managers which they want and most will tell you both. But they will also tell you that more progress on one front usually comes with less progress on the other. It's like squeezing a balloon in one place only to find that it expands elsewhere.
Based on four decades of experience working with some of the world's best-known companies, Dominic Dodd and Ken Favaro explore the three tensions every company faces and how to overcome them. They draw on groundbreaking research into the 20-year performance of more than 1,000 companies and on in-depth discussions with 20 chairmen and CEOs of corporations such as Alcan, Barclays, BP, Cadbury Schweppes, Cardinal Health, Dow Jones, Gillette, Reuters, Roche, Textron, and Xerox.
The authors put forward a radical new way to assess company performance: batting average—a measure of how often competing objectives are achieved at the same time. They show how this matters more than any other single measure of operating performance. And they explain how you can raise your batting average to unlock better performance.
Managers in any type of organization, at any level, will find The Three Tensions an invaluable source of new ideas and practical advice.
About the Author
The authors are from Marakon Associates, called by
Fortune magazine "the best-kept secret in consulting" and by
The Economist "a consultancy that has advised some of the world's most consistently successful companies."
Dominic Dodd is a senior advisor of Marakon Associates. Since joining the firm in 1989, he has been a managing partner and Marakon's worldwide director of marketing and communications. He lives in London.
Ken Favaro is co-chairman of Marakon Associates. In his 22 years with the firm, he has been regional managing partner for Europe and has served two terms as Marakon's chief executive. He lives in New York.
For more information about the book or to contact the authors, please visit www.thethreetensions.com.
Table of Contents
Foreword.
Introduction.
1 The Corporate Cycle.
2 Profitability vs. Growth.
3 Today vs. Tomorrow.
4 Whole vs. Parts.
5 Breaking the Corporate Cycle.
6 The Next Big Thing.
Appendix A: Market Value and Batting Average.
Appendix B: Our Research Methodology.
Notes.
Selected Reading.
Acknowledgments.
About the Authors.
Index.