Companies with futures behind them

To succeed in business, you need to be able to forecast ahead.

Everyone agrees – it’s not easy. Nobody expects the board to be either psychic or clairvoyant but employees do expect, maybe naively, that the guys at the top will be thinking long-term and not exclusively about what’s happening tomorrow morning when considering corporate future strategy.

Unfortunately though, “short-termism” is the norm now and has been for some decades. That means constructive forecasting and long-term strategy has largely gone out of the window, while the focus of the board is on the year-end results in 6 months’ time.

Our corporate future strategy is open to all.

You might be thinking “that can’t be right”.

That’s because you might now struggle to get into your building each day due to the swarm of strategic consultants that seem to live permanently in your company. Maybe you’ve also seen shelves groaning under the weight of paperwork labeled ‘strategic plan’.

So, everything’s OK then.

Wrong!

Let’s look at a few elements of truth:

1. Strategic consultants haven’t got a clue. Anyone who thinks they can walk in off the street knowing nothing about a company and very possibly nothing of the industry it’s in, then a few weeks and several million dollars later produce a definitive five-year strategy, is delusional. It just “aint possible”.

2. In fact, neither the board concerned nor the consultants are delusional. They don’t really believe they can produce a practical strategy like that either – after all, they’re not that smart.

3. The consultants’ objective is to play-back to the board what the board wants to hear, while getting paid mega-bucks for doing so. They don’t really care what conclusions they come to or whether they’re the best approach. They’re not going to be around in 24-48 months’ time to see what happens, so what’s it to them in the long-term?

4. The board is almost certainly focused on the next 12 months’ ahead. They’re worried about the shareholders meeting where they might be criticized and their bonuses are probably linked to a single year’s performance. Their major concern about the 3-5 years ahead is that the shareholders expect them to have something called “a strategy” in place so they need to produce one.

5. Just like the consultants, given the turnover at the top, the chances are that many of the board members will be working for somebody else in 3-5 years’ time anyway.

6. That impressive library of paperwork called ‘The Strategic Plan”? Nobody will ever read it. It’s a smokescreen to give the illusion to investors of long-term thinking. Maybe a few shareholders or members of the press will read the summary conclusions at the front. Some might even understand them but by and large, it’ll never be referenced as a whole and will gather dust. Not the best use of trees for sure.

Whose fault is this?

So, what’s the problem here?

In part, it’s all to do with social change.

Today, fast-buck thinking is endemic in business and it’s getting worse. In the 19th and early mid 20th centuries, many big corporations had boards and shareholders who had a direct and long-lived emotional attachment to the company. Many were prepared to go through really lean times because they believed in the company’s medium to long-term future and this was reflected in the overall corporate future strategy.

That meant that people had a longer-view perspective and were able to place themselves for things like future growth through investment that might not pay back for another 2, 3 or 4 years – or maybe even 10.

To be fair to leadership levels today, they know that if the next pending annual profit figures don’t result in huge dividends to shareholders, they’ll at best be pilloried and at worst encouraged to move on (i.e. booted out). The insane pay structures today now mean they’ll benefit from vast bonuses based upon one single set of annual figures that might look good but which could be utterly unrepresentative of the company’s prospects over say the 3-5 year time horizon.

Can you imagine any set of circumstances more likely to make real strategy development unlikely?

Today’s leaders are just as likely to take actions to protect this year’s figures, their bonuses and shareholder dividends, all at the cost of the company’s future prospects, than they are to make provisions for long-term returns.

That can even lead to disastrous decisions to do things like reducing headcount to drive short-term costs down, while ignoring the effect that loss of ability and knowledge might have in 3-5 years’ time. The selling off of major assets at knock-down prices is another such example.

We can’t blame the guys at the top though. As a society we have become greedy and obsessed with immediate material gains and not patience and sustainable growth. The executive layer in many big companies today is just a reflection of that.

If we’re to get back to genuine healthy prosperity for most of society, the above tendencies must change.

It’s a big ask and no amount of consultants in expensive suits producing vast documents that nobody will ever read or take seriously, is going to drive that change.