The Death of Short-Term Thinking
Every public company faces the pressure of short-term thinking and short-term shareholder return. We are afraid to look to the long-term because the system is set up to deliver us rewards for short-term thinking. Many of us are compensated on short-term wins. The temptation to line our own pockets and those of our team members for short-term gain is great. We may benefit personally, but what about the impact on the business and on society as a whole?
Short term-ism can mean shifting capital needed for business survival and growth over the long-term. The temptation to drive for short-term trading profits can drive investors (institutional and otherwise) to pressure company executives to make decisions that hurt the organization’s long-term prospects. Recently we’ve seen this with the massive job cuts that many organizations have made, cuts to research and development, and reducing or outsourcing customer support to overseas call centers. The short-term gains of many of these programs may be outweighed later by long-term problems with employee performance, customer satisfaction, and organizational relevance.
When we are leading specifically in short-term ways, we produce short-term results that supposedly satisfy investor demands. Our economies lose because companies that are not investing in long-term growth aren’t innovating, and they may eventually lose steam, plateau, or fail. If we really want to benefit the shareholder, is this the way to do it?
When executive pay is based solely on short-term gains, the results can be disastrous. It’s time for us to wake up to what short-term thinking really achieves. Continuously focusing on quarterly earnings versus long-term survival is the number one killer of sustainable, healthy businesses. The good news? Leaders, shareholders, consumers, and employees are all becoming savvier and more proactive about wanting to shift focus to long-term sustainability and long-term value.
How do we move from Short-termism to the long view? We put into practice the four principles of Unfear.
Getting out of Short-Term Thinking: The Ten-Percent Solution
We all get into the rut of addressing day-to-day issues without having time to focus on the long term. If we took ten percent of our own (and our team’s) time to focus on the long term, what would come from it?
Step One: Set aside four hours of your work week to focus on long-term activities.
Step Two: Evaluate after one month. What changes did you make? What happened based on that shift in priorities?
How do you use the four practices of UNFEAR was introduced during week two of this blog series, and is discussed in depth in my book Unfear: Facing Change in an Era of Uncertainty, available January, 2011.