People Are The Missing Ingredient

Why Don't We Manage For The Long-Term?

Derek Park
Contributor: Derek Park
Posted: 06/30/2011

More and more, and not just in industry, we seem to find it difficult to work on the things that really matter. Our priorities seem to be set by others and often we never quite get round to addressing some concerns, especially if these concerns are in the longer term or strategic arena.

Whilst there have been great strides in the digital technologies, we still lack some innovations that thirty years ago, society could reasonably have expected would be delivered by now - an intrinsically safe nuclear energy, a pollution free small engine, or a sustainable way of dealing with the world’s rubbish. Is it possible that these things could have been achieved if we had dedicated more strategic resource to them over the years?

Increasingly, the world seems predisposed to manage for the short term. And this is very much a top down tendency. Few politicians could deny that they always have an eye on the next election when making decisions, even those hailed as ‘strategic’. Our politicians have all proved incapable of sustaining government performance (and electorate support) much beyond ten years, not least because their short-term ghosts all came back to haunt them. Steering for the next election is a frighteningly short time frame but industrial horizons are sometimes even nearer. The questions remain; why do we behave like this and how can we break out of the short-term stranglehold?

There are several factors which push us in this direction but the strongest and most toxic is the surfeit of short-term targets, nurtured by the need to constantly demonstrate day by day delivery to an audience made up of analysts and spin doctors. Some organisations even come to believe their own spin and begin to deny the need for a more farsighted approach. At the very least, the effort needed to constantly satisfy short-term objectives deprives us of the time and capability to manage strategically.

The legacy of short-termism

The short-termist preoccupation impacts significantly on the way our organisations behave, and as such the following effects are not uncommon:

  • When funds are tight, the first thing to suffer is the training budget. Apprentice schemes are still too few. The result is that ageing workforces are a widespread feature in our manufacturing and process industries and soon there will be a marked decline in skill levels as people retire. Twenty years experience cannot be bought on the short-term commodity market.
  • Major overhauls are often postponed as a painless way of meeting the current year’s operating budget. Whilst this can at times be managed to avoid unnecessary risk, all too often it is used as a short-term expedient with little regard for the consequences.
  • Similarly when projects get into difficulty the usual things to be squeezed are commissioning time, operator training or provision of adequate maintenance capability. We trade short term savings for an operating lifetime of difficulty and underperformance.
  • We use poor quality quick fixes for relatively small defects which with a bit more vision could be fixed once and fixed forever. A current example of this is the attempts to repair our roads after recent winter damage. When we eventually get round to doing a proper job (as we one day must unless we accept that some of our roads will become unusable) the costs will far outweigh the short-term savings.
  • Some managers regard short-term management as part of their job and are being rewarded accordingly. Surely a manager’s primary job, once an organisation is operating effectively, is to look to the future and devise ways of ensuring that the business remains effective in five to ten years or beyond. It begs the question as to why big chunks of managers’ rewards are geared to short-term delivery targets.

Towards a long-term managerial approach

So is there anything we can do? Short-termism is so deeply embedded in many organisations that a good start would be to simply acknowledge the problem. But what are the other things we should consider?

  • Be clear about individual responsibilities for short-term delivery and long-term development. Managers need to be aware of their obligations and not be allowed to hide behind a smokescreen of short-term success. Too often leaders will claim, with no real justification, that they have no time or resource to worry about the long-term. We need strategic thinking to be done first thing on a Monday morning rather than something we may get around to on a Friday afternoon.
  • Reduce the emphasis on annual budgeting. Budgets should include elements which are accounted for over a longer period. Without this, short-term financial problems will continue to be resolved at the expense of long-term provision.
  • We sometimes get ‘shocked out’ of short-termism by an operational crisis and in the aftermath make recommendations which often include longer term actions So why can’t we take such actions without needing the catalyst (and cost!) of an incident?
  • Stop rewarding people based on performance against short-term targets. It is not a true reflection of value added to the business.

And what of our politicians? Is it really too much to hope that one day we may have an agreed long term policy on say, energy or transport? I am not holding my breath.

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Derek Park
Contributor: Derek Park
Posted: 06/30/2011

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