Short-Termism Lethal to Business, Survey Finds

More than three quarters of respondents believe that aims of short-term corporate profitability have led to business damaging decisions.

Profit oriented decisions aimed at short-term growth in the aftermath of the economic crisis has led to poor leadership that damages business, a recent study has revealed.

According to a survey conducted by London Business School, 77 per cent of the respondents believe that businesses are increasingly experiencing the heat of decisions fuelled by short-term corporate profitability.

The survey polled 4,000 business leaders.

The shedding of experienced and talented staff, insufficient focus on company vision and investment in future products along with a reduction in investment crucial for growth and sustainability were pegged as the business-damaging decisions, the study said.

Referring to the trend of profit based business decisions, Heather Hancock, managing partner for Talent and Brand at Deloitte UK, said that though cost reduction is like a reflex in a tough market environment, today’s scenario is more “layered” prompting behaviours never 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,” she said.

About 37 per cent rated contribution to long-term economic stability as an important trait of responsible leadership while an equal number also prioritized maximising financial returns to shareholders.

Julian Birkinshaw, professor of Strategy and Entrepreneurship, London Business School, said that the survey clearly reveals an attitude that the leaders need to do everything.

“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,” he said.

About nine per cent of the respondents in the survey were based in the Middle East.