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The Key to Consistent Growth Is Having the Right Incentives
HBR On Strategy
Incentivizing Organic Growth and Avoiding Typecasting in Business Units
Incentivizing organic growth in business units can be achieved by allowing them to keep a significant portion of cost savings for investments in innovation and top-line growth. Another effective strategy is creating corporate scholarship programs to fund initiatives for organic growth that may not be funded by operating units alone, ensuring that units do not feel penalized for investing in growth. Typecasting business units, such as labeling a unit as 'cash cow,' can hinder organic growth by discouraging them from seeking new customer opportunities and benefits for existing customers. This typecasting places a heavy burden on growth engines to drive overall company growth, leading to overreaching and potential stagnation. An example is Viacom, labeled as the cash cow, while its cable business was the growth engine, resulting in mismanagement and limited growth potential until the businesses were separated, showcasing the detrimental effects of typecasting on business units.
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