So often in our attempts to get on the same page, we overlook the fact that organizations—like books—have many different pages. It’s how all of the pages combine to create the entire book, or the entire organization, that is most important. In your company (and most others), the various functions and departments (the pages) have different areas of focus, specific divisions of labor. But when they work together, they should all have unity of purpose.
It’s entirely appropriate for different functions to focus on the 5 Key Drivers of business (Cash, Profits, Assets, Growth, and People) in different ways at different times. But with this focus, they need to make sure they are not sub-optimizing the whole. Most senior leaders and CEOs of public companies focus primarily on growth and profit, as these tend to drive stock prices higher. You will often hear CEOs state that the goal of the company is something like “To build a profitable, growing, and enduring company.”
Shifting Focus: The Urgency Continuum
CEOs, senior leaders and managers, and the company as a whole naturally shift focus among the five drivers over time along an urgency continuum. Depending on the stage of an organization’s development, and based upon complex internal and external factors throughout a company’s history, senior management gives priority to different drivers at different times. In 2010 Toyota had a laser focus on profits after it suffered a decline from a major recall debacle. And when a company makes a huge purchase—as Google did when it announced plans to purchase Motorola Mobility in 2011—it is in a way shifting its focus away from cash and toward assets and growth. Another example occurred in 2008, when banks shifted their focus away from profits and growth and toward cash in an effort to strengthen their financial position during the Great Recession.
Now, just because a company shifts its focus from one driver to another doesn’t mean that the company loses focus on the other drivers. For example, a company in crisis that needs to focus on cash shouldn’t ignore its customers or forget about long-term growth. In fact, a renewed customer focus might be necessary to generate the critical cash required for an investment in assets necessary to fuel long-term growth.
Urgent: Cash. In the start-up stage of a company’s history, the need for cash is typically the urgent focus of management, possibly superseding all other priorities. But the start-up years aren’t the only time a company might be focused on cash. In 1993 when Lou Gerstner took over as CEO of deeply troubled IBM, he said the company’s mission was to “survive.” In his book Who Says Elephants Can’t Dance (HarperCollins, 2002), he said that few people understood how perilously close IBM came to running out of cash.
During an economic crisis, like the one that began in December 2007, many companies focus much more on cash so that they can feel secure in their ability to ride out the worst to come, particularly when credit and capital are hard to come by. But when a company focuses on cash, what does that mean? Often it means conserving cash by cutting costs and investments to improve profitability, which will likely slow future growth.
Near Term: Profit and Assets. In the normal development of a business, leaders want to reach a point where cash flow from operations meets normal cash requirements. Once this point is reached, companies will often zero in on profit-generating initiatives and investments in assets to build asset strength. A management team can then focus more time and energy on creating greater profit margins and using its assets more efficiently to obtain a greater return on investment.
Long Term: Growth and People. Ultimately, a CEO wants to focus the company on attracting the best employees and customers, creating long-term, sustainable, profitable growth. When Apple purchased the music streaming business LaLa in 2009, Apple’s management was upfront about the fact that one of its primary reasons for purchasing the company was LaLa’s engineers. Mature companies that have cash, consistent profits, and asset strength have a solid foundation that allows them to concentrate on growth and people strategies that continue to move the company forward in the long term.
Shifting With the company
When employees impact any of the 5 Key Drivers, they are impacting the overall success of the company. The question is, are they having the maximum impact and the right impact? Every businessperson should ask the following questions to make sure that his or her daily decisions and activities are contributing in the best and most efficient way possible:
- “Which driver is the most important for our company (and why)?”
- “How can I impact this driver? What resources do I need?”
- “What effect on each of the other drivers will this action have?”
- “How can the impact be measured?”
Teaching people to think about these questions regularly will build a workforce that’s able to concentrate on the details of their role, without losing sight of the big picture – the current focus of the company.