Four ways to beat short-termism

Short-term targets can be aligned with corporate principles and long-term value

Muster the courage to set realistic targets. Setting financial targets high – too high to sustain for long – is a tempting way to drive performance.

Muster the courage to set realistic targets. Setting financial targets high – too high to sustain for long – is a tempting way to drive performance.

 

A growing chorus of voices in business and academia point to corporate short-termism as a major threat to business. But most chief executives don’t lack good intent. Rather, they’re missing a practical road map to beat back short-termism and build enduring firms.

Here are four practices to combat corporate short-termism.

1: Tell a story that is bigger than quarterly earnings. Visionary chief executives are adept at telling their company’s story. Great stories are credible, simple, consistent and use both financial and nonfinancial metrics to link a long-term vision and firm values with a distinctive business strategy and focused operational priorities.

Repeat your company’s story often and consistently to all stakeholders. A purpose-driven story of value creation that is clearly and powerfully told is your first line of defence against short-term pressures.

2: Muster the courage to set realistic targets. Setting financial targets high – too high to sustain for long – is a tempting way to drive performance. But the pursuit of those performance goals may drive bad decisions and harm the company’s long-term prospects.

Setting realistic targets is possible only after thoughtful analysis, and requires the board’s agreement along with a good measure of courage from the chief executive.

3: Adopt a “both/and” performance mindset. Successful chief executives see no contradiction between short-term performance and long-term value. They operate with a both/and mindset, seeking to deliver on immediate goals in a way that also builds a sustainable future.

4: Stay true to your values. The demands to deliver short-term results can be brutal and unrelenting. Standing up to them requires a tough skin and a strong moral centre. – (Copyright Harvard Business Review 2017)