In a recent article Building the Healthy Corporation, McKinsey highlights the challenges that companies face in striking the balance between short-term results and long-term performance, and identifies five aspects that leaders should focus on in order to build the resilience they need to deliver and sustain both:
- Strategy – Including a combination of initiatives that embraces both short-term and long-term time horizons, such as new products, markets, processes or even value chains that are future oriented.
- Metrics –Encompassing a broad range of initiatives but linking to what really drives value. Having too many metrics renders most to be meaningless.
- Having a combination of short, medium and long-term metrics is helpful
- Also both “soft” and “hard” metrics are meaningful to value creation
- It is essential to understand the “why” of all metrics, ones that are reached, as well as those not reached
- Comparing to competitors is also important
- Communication – Changing the nature of your dialogue with key stakeholders is important. Talking about strategy with employees is meaningful. Talking about long-term health to short-term investors is meaningless.
- Leadership – Providing senior managers a portfolio of roles is one way to encourage a wider perspective on the business.
- Governance – Resilience and discipline is more challenging with investments that take a long time to pay off. Board meetings are important opportunities to cultivate these skills from the top.
In addition to these critical elements, Building World Class Businesses is a case-based CGMA report that provides key learnings from a number of companies and a “workshop” section that summarizes the key ideas and questions that you might want to consider in putting the ideas into action.