I hope everyone had a great week!! For those celebrating Easter, I hope you had a blessed one. Believe it or not, I had the opportunity to spend time yesterday with one of my daughters and the Easter bunny!
I truly enjoy visiting different groups and spreading the word on values-based leadership. On Tuesday, I had the opportunity to make a presentation to the Rotary club of Milwaukee.
Here’s a short audio clip of the program on Rotary’s LinkedIn and Facebook feeds. Also, here is the YouTube link here of the whole presentation if you would like to watch.
Last Thursday I participated in a book seminar set up by my good friend, Daven Morrison. My talk focused on my fourth book “Your Values Based Legacy.” The other speaker, Paul Brody, did a fantastic job of explaining Ethereum and doing business on the world’s largest blockchain.
Regarding the question above, “Harry, should we be managing the short term or the long term?” All of my current and former Kellogg students remember that I tell them in my very first class that no matter what question I ask, if you answer “yes,” you get partial credit.
To explain why the answer to this question is yes, take a look at my most recent Forbes article, which I shared a link for a couple days ago. A copy of the full article is also below.
How To Avoid Derailment In This Very Uncertain World
The more uncertain the world becomes, the greater the temptation to adopt a very short-term focus, even to the point of seeing only a day or two ahead. Certainly this is one of those times, given the tariff trade wars that have prompted high-profile investors to warn of the potential for “economic nuclear war.”
It is no surprise that the prevailing feeling these days is chaos, as reflected in steep selloffs and periods of recovery in the stock market. Today’s volatile environment can be expressed in simple formula: Change + Uncertainty = Chaos.
The more uncertain things become, the more I strive to keep myself in balance. I pay close attention to what is happening in the short term and ensure that I’m listening to and reading analyses and opinions on both sides of the issues (especially viewpoints that differ from mine). The more polarized the political climate becomes, the more I need a balanced perspective, which is one of my core principles of values-based leadership.
The key is to never lose focus on the long term. Having a multi-year strategy, with milestones to be achieved and accountability for results, keeps an organization moving forward. At the same time, leaders cannot become so focused on the future that they fail to navigate the rapid change and turmoil that’s happening today. That’s why a balanced perspective is critical.
Even in the best of times, there is a tug of war between short-term and long-term thinking in business. It’s a frequent topic of discussion in my MBA classes and in my talks with executives on values-based leadership, and I’m just as likely to hear this question in Asia and Europe as I am in the United States.
It usually starts with something like this: “Harry, should we be managing the short term or the long term?”
Answering The Question
Often, the students and executives asking me this question work for organizations in which leaders frequently espouse “managing for the long term.” On the surface, that perspective sounds logical or even assuring. At the same time, that response is just as likely to elicit eye rolls from people in the organization. The common refrain is, “Then why are we spending 95 percent of our time talking about the short term?”
In theory at least, people prefer the long-term. It’s a distant horizon full of possibilities and potential. That long-term view, however, does not mean organizations can ignore the short term. This is particularly true for publicly traded companies that are expected to generate a return for shareholders every quarter.
To bring this point home, I joke with students that, as much as I enjoyed my 23 years at Baxter International, including my time as chair and CEO, and my 20 years (and counting) of teaching, there is one opportunity that would bring me back into the corporate world. “If you ever hear of a company that only wants to focus on the long term, count me in! That job would pay a lot of money with no pressure to actually do anything—because the future never comes!”
The reality, of course, is that every long-term plan also requires short-term accountability. Think about it this way: what is 2025? In the short term, it’s simple—this year. But with a long-term perspective, it is also the second year of the 2024 five-year plan and the fifth year of the 2021 plan.
Let’s assume in 2021 management approved a $10 million investment for a project that, by 2025, was expected to generate $20 million in cash flow. Now, in 2025, the day of reckoning has arrived. Or, to quote one of my favorite movies, Jerry McGuire, “Show me the money!”
Continuing our scenario, the CEO asks the executive leading that $10 million project for an update. The executive replies, “That investment analysis was five years ago! I can’t possibly be accountable for something we projected back then—especially given how crazy things are now.” How do you think that response will sit with the CEO?
Let’s assume that the executive says the project just needs more time. By 2028, the executive says, the project will generate $30 million. Sounds great, but that doesn’t negate the fact that the team managing the project still has to deliver in 2025—as well as plan for, invest in, and develop people for the long term.
So, which is it? Are we managing for the short term or the long term?
The answer is, “yes.”
Managing Across The Time Horizon
Managing for both ends of the spectrum can be challenging. For one thing, human brains appear to be wired for short term gains, a kind of primal instinct of survival that puts a premium on what could be captured today. The long term, meanwhile, can look like an easy pass—just keep kicking the can of accountability down the road.
However, we don’t live in an either/or world. Values-based leadership requires a balance between managing the short term and the long term, keeping both in perspective and in sync.
When I was the CEO at Baxter, a very senior person in our R&D department (let’s call him “Ralph”) said to me, “Harry, I think that we’re too short-term focused. In fact, I think the senior team is being way too short-term oriented.”
I thanked Ralph for his candor but felt the need to remind him we were spending $700 million a year on research—an investment that had nothing to do with this year.
His response really triggered some self-reflection on my part: “Harry, we appreciate that $700 million. It feels like we’re planting a tree that will bear fruit. However, it also seems like every 90 days, you want to dig it up out of the ground and see whether it grew or not.”
I agreed with his thinking—digging up the tree every 90 days was definitely too short term. Then I told him, “Here’s the need for balance. We can’t wait for 10 years, after we’ve spent $7 billion, to see if anything grew.”
The same thinking applies to managing for growth in an uncertain world. Plans are made for the long term; for example, investing in technology and developing the company’s global workforce. In the short term, there will be uncertainty and even chaos, but the long-term plan provides the destination. Along the way, there are milestones of implementation and achievement.
A Balanced Perspective
No one knows what the final level of tariffs will be and their impact on inflation and interest rates. However, we cannot postpone investments to be made over the next five to ten years. If companies don’t make investments, growth will stagnate. In the aggregate, that leads to rising unemployment and the increasingly possibility of a recession.
What’s needed is balance. Being accountable for and managing both the short term and the long term will enable leaders to avoid becoming derailed by the chaos happening in the moment.
