NOVEMBER 2006           

EMBRACING THE TENSIONS OF YEAR END ANALYSIS

By Tony Mulkern

              What have you accomplished this past year? 

              As we approach the season for assessing progress against this year’s goals and objectives, the question makes many entrepreneurs and executives uneasy.  I find this is true even for clients who have had a very good year.  The reason is that some objectives will typically remain unaccomplished, not matter how many of the “numbers have been hit.”

              While mulling this over, I discovered the article “Managing the Right Tension” in the current issue of Harvard Business Review.  One passage jumps off the page:

Good performance on one objective does not automatically  result in good performance on others.  If anything, the odds are in the other direction. (My emphasis)

In other words, your success in achieving certain objectives tends to produce failure on others, which may be of equal or greater importance! 

              If the authors’ argument is sound, this calls for a serious revision of the Management by Objectives model that has prevailed for the past fifty years across all industries. This model prescribes writing an interlocking set of measurable targets across the organization, which then becomes the “dashboard” from which we drive the organization for the rest of the year, based upon the firm’s mission, vision, values, and strategic plan.

              While it is not my purpose here to review the HBR article, the core point deserves summary.  The authors Dominic Dodd and Ken Favaro argue that every firm has three sets of “tensions” or areas for potentially competing objectives: Profitability vs. Growth; Short Term vs. Long Term; and Whole vs. Part.  The foundation of long term success, they say, is not simply determining which challenging, realistic objectives to set.  It is 1) to determine first which of the three tensions is most critical for your company and 2) to focus energies on achieving balanced outcomes there.  Failure to correctly select the core tension is common and results in frequent changes of course, alarming results on key competitive measures, debates about who should do what, and lots of finger pointing.  These outcomes the authors refer to as “Being Trapped by the Tension.”

              If this sounds at all familiar, try taking a more balanced approach to assessing your firm’s performance in the past year. John Frederich, a senior financial advisor with Ameriprise and a client of ours provides a good example of how to do this.  Based in Pasadena, he runs one of the most successful franchises in this industry giant.  As we discussed his 2006 performance, it was clear this was another spectacular year from a financial point of view, but as Dodd and Favaro would predict, this also meant some of his numbers were not met.

              Instead of automatically seeing this as a failure, he pointed out that two of the accomplishments of which he is most proud for 2006 are not directly expressed in numbers at all and did not at the outset seem of the highest priority.  These include the upgrades to his customer service model and the strengthening of his team.  While his operation has for years scored at the top in customer satisfaction, he never felt it was good enough, since investors can be extremely demanding.  John determined to put in place new policies and procedures for client contact in 2006, even if it does not show up on the bottom line for the year.  As a result, he now deals with “fewer angry people.”  

              Likewise, the growth in volume, referrals, and high net worth clients made it clear to John that he needed a more proactive, service oriented team.  This required making some key staff additions and increasing responsibility and career growth for others.  The result is not merely increased capacity.  John notes that now when he is swamped with “opportunity” he no longer needs to ask for extra effort or hours to complete a financial analysis or client presentation.  Staff notices the need and enthusiastically volunteers to help. 

              While he has not consciously been managing in terms of the “Three Tensions” model, John Frederich instinctively incorporated the essential wisdom it contains in managing his firm and evaluating its 2006 performance.  He has been investing for the future and for long-term success. 

              Sometimes this approach to assessing results is cynically seen as “making excuses” or “changing the subject.”  No entrepreneur wants to be seen as doing such things, but a greater danger is being so obsessed with the “dashboard” of competing objectives that you fail to look at the road ahead, behind you or to the side and end up in a ditch.  The classic example of tunnel vision is Enron whose numbers looked great and whose stock mutual fund managers were still buying when it was well on the way down!

              As you and your team compare your firm’s results with objectives for 2006 ask yourselves the following questions:

              Answering these kinds of tough questions is one of the hard, gritty, non-glamorous parts of business success.  The alternative is worrying, whining, blaming, being stuck in helplessness, or being blithely unaware of the speeding train heading your way.

              Winning or losing in terms of measurable objectives are not the only important measures of lasting success in organizational life.  “Win or lose” apply to war and sports, which are sources of common metaphors for business life.  But really few things are like business.  It is far, far more serious than a field game, and many of the most successful organizations have lasted longer than the longest wars in history.  Some organizations, such as the Bank of New York, founded by Alexander Hamilton, founded almost contemporaneously with our nation, have seen empires come and go.  Newer ones such as Microsoft have made possible philanthropy on such a massive scale that its influence may be felt—and celebrated—for centuries.  One thing all corporations have in common is that they started humbly and small and with vision.

              So after carefully combing through the numbers and carefully analyzing the whys and why not’s with your team, stand at a distance by yourself for awhile and ask yourself on both a rational and a gut level: Is your organization sounder, more prepared for the best and the worst that can happen?  Is it more valued by its clients and customers, do employees feel more loyalty, is it respected more by vendors and regulators?  Is it viewed with envy by competitors?  Is it seen more and more as a desirable place to work and establish a career? 

              If times have been good, have credit and rewards been shared?  If times have been tough, have people pulled together and fought for what they now have and for what they hope to be in the future?  Finally, what have you personally contributed to the strength, integrity, and competitiveness of the organization this year?

Your Comments?

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Copyright, Mulkern Associates, 2006