Striking the Balance

By Ken Witt

In a recent article Building the Healthy Corporation, McKinsey highlights the challenges that companies face in striking the balance between short-term results and long-term performance, and identifies five aspects that leaders should focus on in order to build the resilience they need to deliver and sustain both:

  • Strategy – Including a combination of initiatives that embraces both short-term and long-term time horizons, such as new products, markets, processes or even value chains that are future oriented.
  • Metrics –Encompassing a broad range of initiatives but linking to what really drives value. Having too many metrics renders most to be meaningless.
    • Having a combination of short, medium and long-term metrics is helpful
    • Also both “soft” and “hard” metrics are meaningful to value creation
    • It is essential to understand the “why” of all metrics, ones that are reached, as well as those not reached
    • Comparing to competitors is also important
  • Communication – Changing the nature of your dialogue with key stakeholders is important. Talking about strategy with employees is meaningful. Talking about long-term health to short-term investors is meaningless. 
  • Leadership – Providing senior managers a portfolio of roles is one way to encourage a wider perspective on the business.
  • Governance – Resilience and discipline is more challenging with investments that take a long time to pay off. Board meetings are important opportunities to cultivate these skills from the top. 

In addition to these critical elements, Building World Class Businesses is a case-based CGMA report that provides key learnings from a number of companies and a “workshop” section that summarizes the key ideas and questions that you might want to consider in putting the ideas into action.