The High Road or the Low Road

The High Road or the Low Road

Many Australian managers are very downbeat about the long term survival prospects of their businesses and are concerned about the impact of short term thinking on organisational health. This is the central conclusion of a wide ranging survey conducted by the Australian Institute of Management.

The Institute surveyed 1200 executives (including business owners, middle managers, CEO’s and board members) on issues related to organisational health and survival. The resulting report, entitled Corporate Endurance, finds that:

  • 51% of respondents associated with private enterprises believe that short term profit goals are having a key influence on business performance
  • 15% of board members and CEO’s are not convinced that their businesses will still be around in five year’s time
  • On a more positive note, many respondents named environmental sustainability as a key emerging focus area for their businesses

These findings underline the conflict between long term investment and short term protitability. And with increasing corporate reporting regulations and the strength of media (meaning news spreads fast), bad news about short term results spreads fast and hits hard.

‘Short Termism’ is a topic covered within “Managing for the Long Run” by Danny Miller and Isabelle Le-Bretton Miller. They introduce the ‘Four C’s’, the traits that they have observed in 40 companies that have led national markets for two decades or more.

  • Continuity: Being around for the long term is part of their core cultures. This was evident in their approach to training, apprenticeships and the development of business strategies
  • Community: Invest in employee loyalty by building a community centred on strong values achieved through mentoring programmes and employee friendly policies
  • Connection: Focus on win-win external relationships, treating customers, suppliers and partners in ways that will create long term mutually beneficial relationships
  • Command: Active, intelligent and proactive governance, and managers and boards should have the ‘freedom, knowledge and incentives’ to invest for the long term

For those who have read or followed Branson, you will know that his is one of a number of private companies that ditched their public shareholdings and took back ownership in favour of not having to explain long term business decisions to those who don’t get it.
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A fuller discussion of AIM’s Corporate Endurance survey can be found here

Danny Miller and Isabelle Le-Bretton Miller book is Managing For The Long Run (Harvard Business School Press, 2005) is based on their experience with 40 companies (most of whom started out as family businesses) that achieved long term market leadership.

An executive summary of the Miller’s research project can be found here

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