Short term success in the long term

I once heard of a senior manager in a business who, when meeting a new hire into the business welcomed her, pledged his support when she needed it and then said, “Come back to me in a week and answer this question: how will you know you’ve succeeded this year?”

It occurred to me that this would give any employee, and perhaps many managers, pause for thought. Would success be the revenue the employee had generated in dollar terms? Would it be how her peers viewed her contribution to the business? Would it be her ability to bring in new business, or perhaps her contribution to efficiency? Maybe a combination of all these things, each measured as a percentage on a success matrix?

The business world can be one-dimensional when it attempts to define success. It’s measured in dollar terms, generally with the short term view of quarterly or half yearly cycles. As shareholders, employees, business owners, and human beings we like this because it means we don’t have to cope with too much change or uncertainty at any one time, or for too long a period. We get to understand what’s on the horizon and we feel more comfortable.

When businesses are growing rapidly the short term dollar view remains a valid context for measuring success. However, it’s when growth slows and the numbers are no longer coming easily that our view of success starts to look one-dimensional. We lose faith in the direction we thought we were heading and only then do we start to look at what other factors are influencing our business. At that point it’s invariably harder and more expensive to make changes to your business direction.

There was a recent Harvard Business Review interview* with the CEO of UniLever, Paul Polman. Paul is somewhat revolutionary in his approach to running a significant global business operating in 180 countries. One of the first things he did when he took the CEO position was to get rid of quarterly reporting. In one move Paul effectively forced the company to focus on longer term goals. The change this must have brought to the culture of the business would have been tectonic, as people suddenly had more time to look deeper at their job roles, to innovate more, and even just plan more effectively.

To the last point, Paul has launched a Sustainable Living Plan for Unilever over the next 10 years that covers its entire suite of brands and all the countries in which it operates. This plan addresses environmental footprint, social, and economic issues, and puts these issues at the heart of Unilever’s own definition of success in the future.

Importantly, Paul’s Sustainable Living Plan seeks to double sales as well as halve the environmental impact of its products over the next 10 years. These are long term goals that re-define how Unilever will internally measure success into the future, and with a belief that these new yardsticks for success remain compatible with dollar and share price growth. So it seems success can be validly measured in pure dollar terms even when a long term structure is what defines the business.

One of the greatest examples of the long term view of success is Warren Buffet and Berkshire Hathaway. Warren is oft quoted as saying that he buys into businesses for the long term based on the material and inherent value he identifies. When Warren buys into a company it is mostly with a timeline of decades in mind. Warren has his own formula and it includes the right people and the right long term reward structure to create an environment in which short term dollar success can then thrive. At his company, Berkshire Hathaway, Warren’s incredibly successful career has also been based on reporting to his shareholders just once a year. This ignores the short term vagaries of the markets and allows him and his business unit managers to concentrate on delivering success without the distraction of chasing short term markers, or diluting focus on the long term goals.

What becomes clear from leading examples like these is that the business that defines success via a long term view gears itself up very differently to one solely chasing the short term. Long term businesses end up creating a culture that can have focus on the immediate numbers, but also includes elements such as employee satisfaction, environmental impact, and social impact, as measureable parts of the success definition. These longer term factors to success can be easy to ignore in a 12 month period but prove they have a material impact over 5-10 years.

Some might think, “This is all very well for a few large businesses, but it’s not right for my business”. Yet there are very few businesses out there that plan not to be in business. Therefore if you expect to be in business for 5-10 years why not measure your success that way? Include your monthly and quarterly forecasts and hold yourself to numbers by all means, but ensure you recognise, plan, and measure the long term elements of success that will deliver your numbers year in, year out.

Then when someone asks, “how will you know you’ve succeeded this year?” you will have a ready made answer for this year, and the next, and the next.

* article published Australian Financial Review “Boss” magazine (Friday 13th July, 2012)

© 2012 521 Group. All Rights Reserved.

Tags:

No comments yet.

Leave a Reply