By Melinda Collins
There’s an adage which says ‘fail to prepare, prepare to fail’. The message espouses the virtues of making plans and acting on them. While that’s hardly revolutionary, it couldn’t be more true if it tried. But the trouble is, it’s not always that simple and the catch for businesses can be ensuring short term goals don’t undermine long term targets.
While making tactical decisions that reap instant rewards is a no-brainer from a bottom line perspective, the conundrum faced is whether these very decisions are hurting long term viability. So is New Zealand a nation of short term thinkers more concerned for our daily survival than structured, long term sustainability or is there more to us than that? Are we capable of looking past the next fiscal quarter? And how can we combat corporate short term thinking?
Wellington Chamber of Commerce chief executive Charles Finny says while it is sensible to focus on the short term in difficult economic times, it is imperative we start investing in long term planning. “In the past year or so there has been a substantial focus on the short term, which is sensible.”
Yet many of our companies, he says, are not in a financial position to plan ahead. “Many New Zealand businesses are undercapitalised, therefore they’re forced to think about short term revenue. They haven’t got the luxury of a buffer to allow them to think long term.”
This mindset is damaging our performance against competing economies and is limiting our export capabilities. “Our future is in exporting. We are a country of just over four million — that demand is satisfied really fast.
“If you want to grow your business you need to start thinking of external operations. New Zealanders aren’t focused on establishing long term relationships in the export arena, they are focused on making the short term sale. Success in exporting is all about long term relationships. We need to change that mindset.”
Short term focused businesses have no succession plans in place, which may effect the long term viability of the business. “You need to think long term about who is best qualified to run your business in the future.”
Every business should have plans in place, as it is integral to long term sustainability. “You should know where you want to be in three or six months time, but also where you want to be in five to 10 years and even 100 years. If you’re thinking in those terms, you will see different decisions being made short term.”
While there are businesses out there making solid progress in long term planning, ANZ commercial managing director Graham Turley says many may also be backtracking on progressive, forward thinking plans initiated before the recession.
“Business owners are focusing largely on short term financially focused activities — which is the right approach and vital in the current environment. However, owners should also consider that the recession presents opportunities for the well-prepared, to help them deliver long term business goals.”
Turley says while short term tactics have been tantamount to survival for many businesses, it is imperative they widen their perspectives, now more than ever. “In today’s conditions we can understand and appreciate a business owner’s need to act more defensively and business planning does involve looking realistically at the current environment. But, it should also take into account the business’s long term objectives.
“While the current conditions are challenging, it may open up opportunities in the long term if owners widen their perspective and consider what is happening with their suppliers and competitors and the opportunities from consolidation that may occur.”
No single solution fits every business. “Owners should consider planning for a range of scenarios, to help them in the short term but keeping their long term objectives in mind.”
Owners should always be able to answer questions such as ‘what would I do if one of my major customers or suppliers collapses? Am I in a position to acquire a competitor? Should I consider merging with a competitor to combat the economic downturn?’
“Increasing the scale of the business provides the opportunity to identify efficiencies and compete more effectively on a global stage.
“Other options could be investing in the growing Asian opportunity, adding more capacity or investing in technology. Businesses should actively seek independent advice and expertise on taking advantage of these opportunities. Strengthening governance is also important.”
As in many complex situations, there is no right or wrong answer. Long term strategies and investments are necessary to develop businesses, products and service offerings. Whereas short term thinking is integral for survival in tough times.
Cultivating long term thinking
First and foremost to your plan is to envision exactly where you want to be long term, why you want to be there and how you are going to get there. However simple, it is powerful and will guide your short term actions.
Don’t be afraid to dream big and write about it. Be as specific as possible, using numbers for revenue generated, items sold, people working for you, number of clients or whatever benchmarks are appropriate in your field.
This should prompt you to revisit your business plan, or develop one. Many small businesses never write a business plan unless a funding source requires it. This plan should change as you change mission and should be revisited on a regular basis to see how you’re progressing and maintain motivation.
Few businesses achieve overnight success and many fail within the first two years. Your business plan should encompass realistic expectations for growth and use time frames of three to five years to review growth success.
Wealth creation and rewarding success is great — obviously. However, quarterly earnings should not be the guage of measuring company performance. Look beyond the next fiscal quarter and remember if you stick to your short term goals, you will reach your long term goals.
Generally you have to think long term to have success in whatever venture you pursue and thinking only in the present limits what you can accomplish. If it’s important to you, you will come up with ways to keep pushing forward and you’ll fight to eventually realise those long term dreams and aspirations.
