Short-term thinking - a plague on British businesses

Short-term thinking - a plague on British businesses

This article was written by Tom Quayle, Consultant at The Chemistry Group.

The Germans, as a group of people, are seen as efficient, long-term thinkers. They do it in business and as a country. They are known for efficiency and quality; they think about sustainability and the long-term and implement accordingly. 

It’s an obvious point that we should be more long-term focused. But it remains an unsolvable conundrum in the UK and the US in particular – we are products of an environment and a system that focuses on a quarterly economic cycle. We are only ever, at best, looking three months ahead, with some pretty dire consequences; think banking crisis, think national health service…

Indeed, a recent survey from the Institute of Directors showed that 79 percent of respondents thought that short-termist pressures acted as a disincentive to think and plan for the longer term. Seventy-five percent felt that short-termism deters investment and about 60 percent thought the problem created a disincentive to recruit or undertake R&D expenditure.

The respondents generally felt that the main source of this pressure is from shareholder and investors looking for short-term results. Just under 60 percent thought uncertainty about the economic outlook was a key source.
But is that right? The economy takes the blame for many a thing, yet UK companies have been short-term thinkers even in the ‘good’ years.

Take the mobile phone giants, for example. The environment they used to work in – far before the economy flatlined - is of incredible customer demand. The employee behaviour in that environment had been to ‘get it done, give customers what they want, hit targets’. The problem arises when the market shifts – Blackberry, the largest smartphone platform as recently as 2010, is now struggling to retain third place.

All this takes away from the thinking and longer-term planning behaviours that we’d find in a market that looks to the future.

HR-wise, when the telecoms market shifted, the companies were left with people who hadn’t been encouraged to demonstrate longer term ‘thinking’ behaviours, the ones that today set the good ones apart. They couldn’t give insight or create partnerships based on value. They’d been handling transactions.

And the fact remains that if a company thinks long-term, it’ll operate in a more sustainable way.

So for HR, this has a dramatic impact. Going back to Germany once more, company spend on training and development is much greater in terms of UK proportionate spend. Here, L&D is frequently the first thing cut in harder times, because we operate around quarterly figures and getting numbers in. When that doesn’t happen and there is no plan to turn things around, of course economic uncertainty has a major impact on decisions.

Changing for the better

When assessing leadership, without exception, we see the majority of leadership time is spent on ‘today’ activities. The majority of leaders, without exception, spend most of their time on supporting activity – so low value, done to meet today’s needs, reacting to things that with a better plan in place may not even have arisen in the first place.

Until this is brought to the attention of leaders, they carry on, unaware that they’re simply not doing enough activity for business sustainability. Yet we know, with effort, leadership behaviour around sustainable activity can be transformed.

Working against the system

When it comes to recruitment, the biggest challenges are always two things: pipeline and fit. In the FTSE 100 companies we advise, the number one complaint from managers is that they’ve had an unfilled vacancy for months, and that “good people” are scarce.

These require longer-term strategic thinking behaviours – this is the only way to ensure consistently “good” people are filling a strong pipeline of people who want to work for the company. What we observe of recruitment functions in UK businesses are short term KPI-driven behaviours.

The right approach is to spend the right amount of time upfront, working out the proposition and attraction strategy. Analytics need considering - what does the role need behaviour-wise? What does ‘Good Look Like’ in an ideal employee? Where might the ideal person come from (and it’s frequently not a direct competitor)? What training might they need? What would make this person come to your business in the first place?

Defining all this takes time. It takes research. And it takes a strong belief in the longer term – that focusing on this activity now will reap benefits in the future.

Which brings us to HR’s biggest conundrum – influencing business decisions rather than just being the implementers picking up the pieces. Focusing on the short term leaves HR in no position to provide the insight, the data or the strategic perspective to acquire significant investment, and to avoid the inevitable ‘cuts’ that sit alongside economic hardship.

The trouble is, to do all this, you’re going to have to work against the system, which will be a hard slog, but for those of you brave enough, it'll be worth it.

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