PROFIT'S NOT THE ONLY THING
Companies are increasingly focused on meeting short-term profits at the expense of long-term growth - and that’s not good for business, says Murray Eldridge, author and Chartered Director at the UK Institute of Directors (IOD).
The pressures today have never been greater on leaders to produce short-term results, driven by an unhealthy addiction to quarterly goals. Call it an organisation’s survival instincts.
Yet, the paradox, says Eldridge, is that the same pressures may destroy long-term shareholder value if executives are forced to cut spending on innovation, R&D, new ventures that may results in curtailed growth in the long run.
It’s relatively easy to get a short term returns but it’s normally at the expense of the future
“It’s relatively easy to get a short term returns but it’s normally at the expense of the future. So, I think that’s one of the biggest challenges. Can you manage the shareholders? Can you get them to buy into your vision and your purpose?,” asks Eldridge.
“If they cannot convince the shareholders about taking a long term view on the market, then either they may not be quite right for the business or maybe the shareholders will get what they deserve. It’s as simple as that,” he says during a talk in Kuala Lumpur, organised by Institute of Corporate Directors Malaysia.
Eldridge is a Chartered Director and has been a member of the UK’s longest running organisation for professional leaders, the Institute of Directors, for 15 years.
The Brit - with over four decades of international experience in shipping, oil & gas, telecom, water and international consulting - emphasises that leaders who cast a good long term vision for their organisations are better in navigating external challenges on a day-to-day basis.
He cites pharmaceutical and consumer packaged goods manufacturing company Johnson & Johnson as a good example of ‘doing it right’ in keeping its vision consistent. “The have a really good track record although they are in a very difficult space,” says Eldridge.
“In general, despite all those ups and downs of the the industry and sectoral issues, Johnson & Johnson is a highly admired company. They have had multiple chairmen over the last 50 to 70 years and yet it hasn’t affected them. Every chairman lives and breathes that vision, that purpose, that ethos of the company and that has given longevity to this high performing company.”
“And they keep it consistent. So, the shareholders know what they are buying into - the long term vision of the company,” he adds.
What Have You Got for The Future
Eldridge also emphasises that leaders must also keep an eye on the wider view in pursuit of long-term goals.
“I think one of the problems, especially if you are the executive of the board, is if you get completely caught up in the day job and the life of the company, it becomes your sole focus.”
As a leader, it is about trying to become comfortable with the future and spending more time out there
“As a leader, it is about trying to become comfortable with the future and spending more time out there. That means, researching, reading, being interested in everything that is going on, especially trends that are affecting your business,” says Eldridge.
“But if you don’t have the interests and you don’t sensitise yourself to what’s coming on, then you are going to make a decisions here,” says Eldridge, pointing at his back. “And you are going to be surprised when something hits you in the face.”
His advice to leaders? “You are never going to be right about what that future is, but you must be sensitive to a range of futures.”
Here, he says why leaders ought to be comfortable to make decisions with imperfect information.
Be Comfortable To Make Decisions With Imperfect Information
2 / 3
Free articles leftSubscribe now