Too many businesses are fixated on immediate gratification. All too frequently, a company’s worth is now measured almost entirely by the paybacks it achieves in the near term, rather than by its ability to plan effectively and execute a sustainable long-term growth strategy. The use of this barometer to keep score significantly intensified after the economic meltdown of 2008.
Management teams are now on a very short leash. “What have you done for me today?” is the mandate for public companies with their required 13-week earnings report cards, and both public and private companies must typically provide their lenders each month with data that measure results against promised targets. Much of this is appropriate. The negative, however, is that management has less incentive and support to focus on far-off goals to ensure the company is still in business 20 or 30 years from now.
When a company misses the mark, even for a month or a quarter, the team finds itself under the glaring bright lights of intense scrutiny, which can make even the most secure management skittish about undertaking costly programs.
In this current environment, a CEO’s tenure is almost measured in dog years. Although definitive figures are not yet available for last year, some estimate that the median average tenure of the top executive at a publicly held company may have dropped to a new low of approximately 5.5 years. This presents a dramatic, more than 40 percent decline from about 9.5 years of service in 1995.
Whatever happened to the nurturing of the CEO by the board of directors or advisers providing him or her time to gain insightful understanding of the intricacies of the business that leads to sustained growth and the ability to implement long-term plans? Isn’t the obligation of a management team to ensure that it makes the appropriate decisions to pave the way for the next generation that follows?
Think about it this way: It took more than 100 years to build the great cathedral of Notre Dame in Paris and a span of hundreds of years for the Great Wall of China to be built during the Ming Dynasty. Those making the decisions to embark on these massive undertakings surely knew that they would never see the full fruition of their planning. They knew that they were planting trees under which they would never sit.
In modern times, a project that might take a century or more to complete is obviously a bit much. However, for a more realistic example, think about energy companies, which must make decisions today to ensure that we have the energy plants for tomorrow. These expensive, very long-term projects require huge capital, extraordinary amounts of time and the maturity of management to know that most likely they will not be around to savor the completion of the new facility. Current senior management teams in all companies must understand that what they do on their watch will become their legacy on which history will judge them.
There are dozens of reasons why a company does not plan far enough into the future. Aside from being selfish because current management will not be the beneficiary of the efforts, perhaps a bigger reason is that companies don’t have the backing from their constituents to do some of the things necessary for the next generation. In many cases, this would require too big a hit to current profitability. In a more esoteric scenario, some narrow-minded leadership would say, “What’s in it for us and our shareholders or investors today?”
There are many excuses, some of which are comparable to a fifth-grader who does not turn in his or her homework and asserts, “The dog ate it.”
Companies that make equally absurd statements about focusing solely on the present might be better served by using the dog-ate-it excuse plus it would probably be more believable and make sense.
Today’s leaders must balance short-term, intermediate-term and very long-term objectives in order to satisfy all of their constituents and to improve the odds that there will be a tomorrow.
Being a CEO is akin to being a tightrope walker who must have nerves of steel and very good balance. Unfortunately, we all know what happens to tightrope walkers who lose their balance they fall, and most times, they don’t ever get up again.
Michael Feuer co-founded OfficeMax in 1988. Starting with one store and $20,000 of his own money, Feuer, as CEO, grew the company to almost 1,000 stores worldwide with annual sales approximately $5 billion before selling this retail giant for almost $1.5 billion in December 2003. In 2010, Feuer launched another retail concept, Max-Wellness, a first of its kind wellness chain featuring more than 7,000 products for head-to-toe care. Feuer serves on a number of corporate and philanthropic boards and is a frequent speaker on business, marketing and building entrepreneurial enterprises. Reach him with comments at firstname.lastname@example.org.