Short-termism to blame for bad business

The survey of business leaders conducted organised in collaboration with Deloitte found that 77 per cent of the leaders surveyed said business is now counting the cost of quick wins that have included: the shedding of experienced and talented staff; insufficient focus on company vision and investment in future products; and a reduction in investment that is crucial for growth and sustainability.

Heather Hancock, Managing Partner for Talent and Brand at Deloitte UK, said: “In good markets, leaders can get by majoring on ambition and vision – and just keep hiring new talent to deliver growth. In tough markets, it’s understandable that the first response is cost reduction. But today’s story is more layered. The complex, unpredictable economic environment has prompted behaviour we haven’t necessarily seen before.

“Some leaders decided to hold onto talent, with the risk of lower productivity offset against the disruption of rebuilding a talent pool as growth is realised. Others emphasised retrenchment, figuring that new skills will be accessible when business opportunities present themselves. Maybe the real winners will be those who navigated between two poles.”

When asked how they viewed the responsibility of leaders today, more than a third of leaders rated contributing to long-term economic stability as very important. 37 per cent also rated maximising financial return to shareholders as very important, while just below 30 per cent of leaders questioned cited creating a responsible culture as a top priority.

“The message seems clear: we want our leaders to do everything!” says Julian Birkinshaw, Professor of Strategy and Entrepreneurship, London Business School.

“There is an increasing recognition that we need new models of leadership, where business leaders can balance the needs of multiple different stakeholders and be visibly accountable to the organisations they work for rather than the other way round. But it is not obvious what these alternative models might look like.”

Professor Birkinshaw argues that there are many different models of corporate governance that avoid the short-termism and financial focus of the Anglo-American model. The longevity of family firms and the checks and balances of democratic government, both contain useful lessons for business, he concluded.