CEO Coaching: The Slippery Slope of Short-Termism

“In the short run, the market acts as a voting machine; in the long run, it becomes a weighing machine.” —Ben Graham, Warren Buffett’s mentor

It’s shortly after lunch as I write this, and I’m confident I’m in the top 5% of healthy eaters on the planet. For the last two meals. 

Most would agree that short-term thinking (and action!) in diet and exercise is really dumb. And most would agree that short-term thinking in the business world is also really dumb. But many leaders violate that belief as often as new diet plans. 

A McKinsey study that incorporates 615 public companies (60%+ of the market capitalization of US public markets) states that companies focused on the long term have, on average, much higher earnings growth and return to shareholders. 

I’ve never had a client or known of a leader who used a short-sighted decision to intentionally lose money, reduce growth, or screw with their shareholders. They always thought they were doing the right thing in the moment. It’s the same reason a 4-year-old would rather have one marshmallow immediately rather than two in 15 minutes. 

Once you start down this short-term thinking and behaving road, you won’t return— I’ve rarely seen anyone turn this ship around. You’re stuck with one marshmallow. Your board or investors will expect you to do a rain dance every time a cloud appears. 

It’s in great measure about expectations. If you, as CEO, commit to a long-term approach, you must set it when you take the job and be confident that whomever you report to (e.g., board, investors, family) will support you. If you own the company, commit to your approach and hew the line. Get a coach to help you. Let your coworkers call you out when you violate it.

It’s about having clear thoughts about the future and a good process to plan. Plans need to be modified, but not for every speed bump. If you ask, “Does this decision align with our strategy?” and can’t answer the question, you’ve already screwed up.

It’s also about taking risk. If you won’t risk your job to do the right long-term thing, you’re on the road to one marshmallow. The CEO who won’t occasionally stand up to their board or investors is no longer Batman, just Robin. Perhaps the next CEO (likely a turnaround specialist) will do better.

For a great example of long-term thinking and behavior, read some of Warren Buffett’s letters to shareholders in his annual reports. Here is a link to all of them. His approach has worked out well. Also note that he’s open to talking about his mistakes and often leads with them. 

I hope you’re rewarded with lots of marshmallows in your career. It’s going to take some hard work!

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