How combat short-termism
It’s no secret that businesses today are facing more short-term pressures than ever before, thanks to factors like a 24-hour news cycle, activist investors, and analysts focused on quarterly reports. And that’s a problem, because a long-term perspective is critical in a fast-moving world. All around us, innovation is creating new jobs and whole new industries, while leaving old ones behind.
To keep up, we all have to separate the long-term signal from the short-term noise – to prepare not just for where the world is today, but where it’s going. So how can we effectively strategize for the long-term? And, just as importantly, how can we gain our stakeholders’ support? In my view, there are three key actions for business leaders to consider.
Find Allies in Investors
While some shareholders are now focused on short-term returns, there are plenty pushing for a long-term perspective, too. In fact, some of the largest global institutional investors, including leaders at Blackrock and State Street Global Advisors, are increasingly voicing concerns about short-termism in the marketplace. Blackrock’s CEO Larry Fink has even urged all companies to communicate “a strategic framework for long-term value creation” for shareholders each year.
There are also encouraging signs that this viewpoint is gaining traction in the investing community. In one example, S&P Dow Jones Indices launched a Long Term Value Creation Global Index earlier this year. CEO Alex Matturi called it a response to “intensifying investor demand for a benchmark” that makes it easier for long-term investors to find and track companies that share their long-term values.
If more investors adopt this mindset, they can vote with their dollars to stand behind a strategy that’s longer term – counteracting those pushing for quick returns. Businesses can seek out these likeminded investors, and work with them as key allies in making the case for a long-term strategy.
A Clear Long-Term Plan
In today’s world, strong communication skills are of the utmost importance. If you don’t explain your strategy well, investors – and even your own people – won’t understand why they should trust you. So business leaders need to convince all their stakeholders that their vision of the future is right – and that they have the right plan to get there…
This discussion reflects just how much our world has changed in the last few decades. Back in 1975, a company’s balance sheet reflected about 83 percent of that company’s value. Today, some people argue that the assets on that balance sheet comprise less than 16 percent of a company’s true value.
Instead, much of a company’s actual value is tied into things like brand, talent, and intellectual capital – the assets that are crucial to creating value in both the short and long term.
This disconnect is why General Electric recently became one of the first major U.S. companies to supplement traditional disclosures with an integrated report. The report laid out the company’s long-term strategy in painstaking detail – which should help get stakeholders on board with executing that plan.
Prioritize Your People
At EY, we never take it for granted that the skills that made our people successful yesterday will be the same skills they need tomorrow. That’s why, last year, we invested more than $500 million in training our people. Around the world, they underwent 8.2 million hours of formal learning. And that’s just the starting point…And as we prepare for the future, we know we need to do more than just help our people gain the new skills they need. We need to make it easier for them to work in a whole new way.
This is partly driven by the demand of the Millennial generation, which already comprises about one third of the global workforce, and about two-thirds of the people at EY. These younger workers tell us, quite clearly, that they want more flexibility and control over their lives and careers. In fact, 75 percent of millennials in a recent EY survey said they want the ability to work flexibly and still be on track for promotion…
We’re using technology to create more remote working opportunities along with new tools to promote messaging, collaboration, and teaming. We’re opening ourselves up to a variety of work settings, and communicating our new emphases on trust, collaboration, and results in the workplace. We expect these changes will make our people not just happier, but also more successful and productive.
These are just a few ways to counteract short-termism. In Aspen, I heard a number of other ideas. And that’s why, despite the great challenge short-termism presents, I’m still optimistic. If I took one thing away from the Aspen Ideas Festival this year, it’s that for all the global obstacles we face, there are just as many great minds coming up with even more innovative solutions.
Leadership means seizing those solutions. It means planning for the long-term – and executing and communicating a strategy that brings all stakeholders along.
Dal profilo LinkeIn di Mark Weinberger, Global Chairman & CEO, EY