In a recent article for Management World Magazine, I shared my thoughts about sustainability for organizations. Towards the end of the article I indicated that organizations “…must stop managing organizations from quarter to quarter or year to year. Instead, we must manage them for the long-term and beyond the time when we will be with the organization.”
I received a comment from a reader who shared that they thought that I was being a bit radical in my call for ceasing management on the short-term. He shared: “Businesses still need their quarterly and yearly plans, budgets and audits. We cannot completely do away with those as they help us shuffle our priorities. Long term planning is an add-on to the normal business activities.”
My reply was lengthy, which I will share below. Interesting enough, there seems to be some movement in the direction that I’m advocating. I just today read an article in CFO Magazine about Credit Suisse taking a different approach to management compensation. While there are some pitfalls that will need to be avoided by taking the approach that they are taking, I think it will be interesting to see what happens with this organization, and others if they follow suit, over the coming years.
My original article on Management World Magazine on Sustainability
My response to the reader:
I chose those words because I do believe that we need to move away from the quarterly reporting mindset. This sort of mindset creates a lot of problems for organizations, including the fudging of numbers, making decisions that will impact the numbers for the quarter only briefly, and then cause greater problems in the long run, and other such shortsighted actions that only lead to hurting the organization. Besides, quarterly reports are only there for the stock analysists, anyway.
As I share in my book, after analyzing a lot of data about the best organizations I discovered that they are doing different things. They aren’t running themselves on a quarter-to-quarter basis. Instead they are collecting real-time information and looking at it daily, but comparing it to their long-term goals and these goals comprise their balanced scorecard. While some are economic, others are relationship focused or focused on the organization’s ability to take action, while others are focused on achieving longevity for the organization. (see July’s Management World for more information on the four areas for setting REAL Goals: http://cob.jmu.edu/icpm/management_world/bpjuly09.pdf.)
As for shuffling priorities, if you have properly selected your REAL Goals, you can easily prioritize them so that there are no goal conflicts, which many organizations often run into because their goals are ever changing. With the REAL Goals prioritized you can easily adjust your priorities on a daily basis without having to wait for the end of a quarter or the end of the year. This makes an organization much more nimble in an ever changing world.
So, yes, I do believe that we must stop managing our organizations for the short term, and give up that practice entirely. Its fine if a company wishes to continue to share information with stock analysists on a quarterly basis, but that should be a Public Relations function and not a management one. Long-term, and by that I do mean 20 years or more, should not be the add-on, but rather that should be the Primary focus; everything else that is done is done with these objectives in mind. Our day-to-day activities are done in order to get us there.
I know that some of what I share is challenging, but believe me, as I conducted my research I had to rethink a lot of what I had been taught, as well. Keep in mind that “the best organizations don’t just do things differently; they do different things.”
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