The Perils of Playing a Short Term Game

Should you ditch your long-term plan in favour of rapid returns for your backers? Are quarterly sales targets the only results that matter? Short-termism — i.e. lurching from one quick fix to the next, is a risky game to play.

At the beginning of this year, Jason Burt of The Telegraph suggested that Leicester City Manager, Claudio Ranieri could find himself the recipient of a statue in his honour, along with the sack — all in the same season.

The statue is yet to materialise, but the P45 has been duly issued. And if there’s one lesson to be learned from it all, it’s this: winning the Premier League at odds of 5000/1 — and reaching the knockout stages of the Champions League counts for very little. At least, not when March is approaching and you are hovering on the edge of the bottom three.

There tends to be an element of desperation in these post-Christmas, bottom-of-the-table managerial dismissals. Many clubs are looking for a ‘bounce’; a quick fix to cover any number of problems. The toxic atmosphere in the dressing room, fans protesting over the upcoming season ticket hike, lack of a transfer strategy that makes sense long-term, a neglected academy: all of this can be put to one side. Just focus on getting nine or ten points from the next five games and we can think about everything else later.

Why we’re all a slave to the league

There was a time when league tables were confined to the sports pages. Now it seems, they are everywhere. Go in for a hernia repair and both the surgeon and the hospital will be on some league table or other. Seven-year-olds aren’t immune; we’ve now decided to put primary schools in leagues — and we apparently think that the results are important enough to determine how much houses next to ‘winning’ and ‘losing’ schools are worth.

In business, sound competitor analysis has always been desirable, but these days it seems to have gone into overdrive — all thanks to ‘benchmarking’. Everything about our companies, we are told, can and should be measured and ranked against our competitors.

The growth of social media is undoubtedly one of the biggest drivers of this. From likes to re-tweets, it’s all about the number of fans we can attract.

What’s more, the sheer variety of metrics you can track is phenomenal; get hold of the right tools and it becomes possible to hoover up every single conversation, mention and interaction with your brand online. With the help of a clever algorithm or two, the software will place you in a league where you are pitted against your competitors in areas such as brand reach, awareness, sentiment and “engagement”.

Better still, all of this can be measured in real time. Get a few people talking about your latest video and the reaction is fed back to you instantly; if your competitor’s promotion goes down a storm, you get a message on your mobile telling you how far you’ve dropped in the rankings as a result.

All of this is billed as a way of being able to stay on top of your strategy. But here’s the downside: it also happens to be a recipe for short-term thinking and a quest for gimmicks.

A Facebook giveaway promotion might fly in the face of everything you stand for in terms of quality and tone — yet you go ahead with it anyway in a quest for a quick boost in follower numbers and engagement levels.

“You can’t build a long-term future on short-term thinking.”

— Billy Cox, author & keynote speaker

Or take Audi; a company whose social media presence consisted largely of what its existing followers wanted: nice images of great cars and info on their product range. It was steady, simple and popular but someone decided it wasn’t enough.

They wanted a quick boost and a social edge — so the PaidMyDues campaign was born. These were supposed to be inspiring homegrown stories where Audi fans explained why they deserve and Audi. Followers were encouraged to send through stories and pictures representing their ‘triumph over adversity’; a celebrity chef and artist were both involved for added zeitgeist in an attempt to turbocharge interest..

But the company’s existing supporters had different ideas. ‘WE WANT CARS’ was typical of the Twitter response. An about-turn on strategy quickly followed. It was all too far removed from what the company was supposed to stand for. Instead of being engaging, it proved downright annoying.

It’s your season ticket holders who pay the bills — not the fair weather fans. Going viral for an instant boost really isn’t worth it; at least, not if it involves putting aside your values, your story and all the things that made you worth supporting in the first place.

Are your supporters in it for the long haul?

“So if you buy into this long-term value creation model, which is equitable, which is shared, which is sustainable, then come and invest with us. If you don’t buy into this, I respect you as a human being, but don’t put your money in our company.”

That was the message delivered loud and clear by Paul Polman, shortly after he took over the reins of the Unilever in 2009. The organisation boasted a 100+ year history, and, as Polman explained, “We want to be around for several hundred more years.”

Polman realised that companies don’t last that long without being “in tune with society”, and he also saw that this needed to be re-asserted with a fresh emphasis on sustainability: “Unilever needed to shepherd the Earth’s future as carefully as it did its own revenues and profits.” Building on existing initiatives, Unilever has developed from being 10% to 65% sustainable; Polman has shown a willingness to restrict operations and resist a quick buck, if it goes against the company’s conscience.

The profile of shareholders changed as well; at the start of his tenure, 60% of top shareholders held shares for five years or more — whereas now, 70% of shareholders hold their shares for seven years or more.

Unilever already had a proud history; right from its beginnings, the company was an early pioneer in areas such as working hours, housing and pensions. It was building on this and sending a clear message to would-be backers about the route it would be taking.

• This is what we stand for
• This is what we’re building on
• These are the values that are going to inform our strategy

It becomes a lot easier to avoid conflicts and misunderstandings with your backers if you are clear on your values before they come on board.

Can they see beyond the next three months?

How important are your quarterly results?

Not important at all, according to both Unilever and Nestle. Neither company publishes them precisely because of the short-termism they breed. With quarterly results come quarterly profit projections — and failure to meet these means pressure from investors is inevitable. Complicated missions and long-term goals are pushed into the background as you continually strive to drive up share prices for those investors.

It can also put immense pressure on your people. In this intense environment, sales targets can go beyond being a form of incentivisation and become the be-all-and-end-all. Your values; delivering the best possible service to customers, providing a genuine service (rather than ‘pushing’ as many products as possible onto them) and building a supportive team — soon go out of the window if the entire focus is on the targets.

“My own view is that every company requires a long-term view.”

— Jeff Bezos, Founder & CEO, Amazon.com

Does it yield results? In the short-term perhaps, but if it’s the spreadsheets that are driving your culture rather than your values, the consequences can be a Wells Fargo situation. It starts by telling your staff to focus on cross-selling to keep up the numbers. In the beginning, you justify this by saying it’s about “deepening the bank’s relationship with its customers”. You hastily come up with a target of eight products per-account holder (because “eight” rhymes with “great”). You turn a blind eye to a culture of individual employees ‘cooking the books’ a little. And you end up with more than two million fake accounts on your books — along with the threatened breakup of the business.

What’s driving your decision making?

As the sixties drew to a close, foreign competition meant Ford was sliding down the league table. So Ford’s executive VP, Lee Iacocca came up with a quick fix. He would get his team to produce a car weighing under 2,000lb with a selling price of $2,000. What’s more, instead of the normal time span of 43 months, he would get it out there in 25.

It was a rush job — and the faulty design that made the tank vulnerable to explosion after rear end collisions would lead to an estimated 500 deaths and many more injuries. It would culminate in Ford being the first U.S. corporation to be prosecuted on criminal homicide charges.

It turned out that misgivings expressed by technicians in the development stage had been brushed aside. The company’s guiding principles, including the ideas that “Quality comes first” and “Integrity is never compromised” had been pushed into the background. The number one priority was getting the car in showrooms for the 1971 model year.

Acting quickly and decisively isn’t the problem. Doing something new isn’t a problem. But if you bypass everything you stand for for a quick fix or a temporary boost, it’s a recipe for further problems ahead.

Originally published at https://beliyf.com on April 27, 2017.