The Short-Term versus The Long-Term – Can Organizations REALLY Manage Both?

There is no doubt that there can be serious tensions between short-term and long-term objectives and decisions in business. However, I would argue that the pressures currently faced by organizations and leaders in the private sector (e.g. demands by the street and shareholders to demonstrate quarter over quarter profitable growth; incentive bonuses based on performance on annual business targets; etc.), and the public sector  (e.g. shifting projects and areas of focus based on the issue of the day and/or the policies of the current governing political party) are actively diverting the attention of organizational leaders away from managing this tension, placing it almost solely on short-term projects and decisions.

This needs to change because taking a short-term business focus ALONE can be disastrous for an organization.

For many businesses, short-term decisions lead them into blind alleys and business dead ends that can be extremely difficult to get out of. If they are lucky, business leaders can back their company out of these situations and recover from any associated business losses. However, over time, with a persistent focus on the short-term, organizations and their leaders often wake up at some point in the future only to find that they are in a place they don’t want to be. In the worst case scenario, today’s short-term decisions, made without thinking about long-term ramifications, can destroy the long-term value of a company. That is, the short-term business decisions made today could be seriously limiting the long-term viability and sustainability of a (your?) company.

Shouldn’t the number one concern of every organizational leader out there be making sure that their company will be here tomorrow? I think that it should.

The key to ensuring long-term business viability is: (1) to help our business leaders realize that they must include both short-term and long-term business objectives in their decision-making; and (2) give them the tools and training they need to manage the tension between the two better.

Managing both the short-term and the long-term is truly a balancing act. It is easy when a short-term objective, decision, or action will also benefit the long-term objectives of an organization. More often than not, the relationship isn’t so easy. Often, a short-term objective or decision will have some negative consequences in the long-term. And, sometimes, a short-term decision with a positive impact on the long-term is very unpopular today (increasing the pressure NOT to make this decision or take the unpopular action). When these situations occur, tradeoffs are usually required. So, how can business leaders make these tradeoffs in the best way possible?

The key to success is to make short-term and long-term business objectives visible at all times and place them front and centre when strategic business decisions are being made. This will facilitate conscious decision-making – making short-term decisions with a full understanding of, and consideration for, their long-term impact and ramifications.

The best tools available for helping leaders do this successfully are the prioritized strategy map and the balanced scorecard (BSC). First, the strategy map gives organizations the opportunity to put all the elements of their value creating strategy on one page – side by side. Remember that the strategic objectives on a strategy map are meant to work together to achieve an organization’s mission (you can’t get more long-term than that!). Marking some of the strategic objectives on the strategy map as “high priority” then allows business leaders to identify some of the short-term priorities for the business. However, it is important to note that, even when prioritized, all of the strategic objectives on the strategy map remain “in play” – this is how the prioritized strategy map helps keep short-term AND long-term objectives and priorities at the centre of the decision-making process.

Balanced scorecard indicators, when selected based on their alignment with strategic objective definitions, give business leaders data and valuable information about strategic business performance and highlight, very visually, when various strategic objectives are underperforming/are at risk. Sometimes, actions and business decisions will result in positive performance results for short-term priority objectives (i.e. the more highly weighted objectives) while having a negative performance effect on longer-term priorities/objectives. The value of the BSC is that it makes these cause and effect impacts visible to business leaders and decision makers. With information about the performance of both short-term and long-term objectives available for consideration, business leaders are in a better position to make conscious, informed tradeoff decisions. While business leaders may still decide to take short-term action that will have negative consequences in the long-term, the BSC helps them understand that this is the case and allows them to monitor the impact over time on long-term objectives via the BSC, and then take remedial action to improve results for the long-term objective when required/the time is right.

The key in business is not to shy away from managing the tension between short and long-term business objectives and decisions – this tension exists whether you want to face it or not. Organizations that fail to consider both the short and the long-term run the risk of negatively impacting the long-term viability of their company. The best advice for sustainable business success is for business leaders to acknowledge that both the short and long-term aspects of their business need to be consciously and actively managed and then to do it in an informed and transparent way leveraging the weighted strategy map and the balanced scorecard.

The long-term viability of your organization is depending on it!

1 Comment

  1. Mihai Ionescu
    Dec 21, 2016

    Very nice. One step further and we would reach ‘the basic tension in Strategy’, between improving the current competitive advantage and building the next one.

    To find out more, read ‘The Three Tensions – Winning the Struggle to Perform Without Compromise’ by Dominic Dodd and Ken Favaro.

    Further on, Cesare Mainardi, the former CEO of Booz & Company (now PwC Strategy&), explained in his 2010 article ‘The Right to Win’ that there is a ‘basic tension in Strategy’, between the current set of Capabilities, the current Transient Competitive Advantage and the new set of Capabilities, to be developed or re-configured, as required by the new mix of Strategic Choices that define the new Transient Competitive Advantage.