Simon Terry

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Are You Leading for the Quarter or the Future?

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No rational person would jeopardise their future to meet an arbitrary 90 day milestone. Too many corporate incentives are structured exactly this way.

There are many eloquent complaints about the danger of the short term focus of corporations, especially publicly listed ones. My concern is that this short term focus stands in the way of more human and more responsive organisations. This short term focus divides accountability.

Time is short

One force driving the pathology of traditional management approaches is short time frames & arbitrary division of time. Results are fragmented down to hourly, daily, weekly, monthly and quarterly targets. We engage in the division of time as much as we divide work.

Incentives and management processes are tied to these short term results. Dividing time in this way values values the present quarter or time period to the exclusion of almost all else. As a consequence the arbitrariness of the short time frame becomes an invitation to treat the entire process as a game and to push the future far from consideration.  

Getting the number

When a decision is made with the sole objective of delivering a number, we enter a realm of dangerous ethics and considerable risk to the future. Purpose, customer relationships, employee engagement and community reputation are immediately in jeopardy, as everyone focuses to deliver the certainty of the financial outcome required.

The pressure of a short time frame immediately eliminates activities:

  • that may require upfront investment, time or effort
  • that may involve uncertain returns like experimentation, new product development, enabling customers, employees or other stakeholders, etc
  • that involve thought, analysis, research, input or consultation
  • that deliver large benefits beyond the time period
  • that have any form of initial dip in performance

This remaining options usually come down to one or more of the following:

  • bringing forward returns, usually at a significant discount
  • grabbing more value in the relationship with another stakeholder without regard to longer term consequences in the relationship (for example by raising prices without regard to impacts on loyalty or market position, demanding rebates from suppliers, etc)
  • arbitrary cost cutting, especially employees or ‘discretionary expenses’ like marketing, training, maintenance, support, etc where effects are not immediate 
  • accounting treatments, particularly relating to the recognition or allocation of revenue or costs and the valuation or recognition of assets and liabilities
  • outright fraud and deception

Waste

Some of these changes may cut waste or realise value, largely by accident. In many cases, the organisation responds to the changes with innovations that ameliorate the longer term impact or at a minimum defer them for another quarter. Pressure can inspire creativity and efficiency. The negative future effects and ongoing pressure can also generate a treadmill of even greater pressure.

We must be clear that this activity is waste. Playing the numbers game is wasteful effort. It risks the future and compromises the core value creating relationships in the business. The demands of the ‘numbers game’ work to unravel any efforts to become a more responsive organisation. The ask to meet numbers always pushes for planned outcomes, maximum control and a lack of transparency in decision making.

No Division of Accountability

Accountability for outcomes is core to the future of any organisation. Ending number games does not mean an end to accountability. It means greater accountability.

  • Let’s be accountable to make every decisions in line with purpose and values.
  • Let’s ensure all employees are accountable to deliver now, for a better future and to realise people’s potential.
  • Let’s ensure that the accountability is an accountability to all stakeholders.
  • Let’s also work to deliver each day in a realistic manner to our long term goals, not just scrabble to manage an arbitrary day that we choose to report.

We need to end the division of accountability.


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