Short Term Opportunity, Peter Drucker, and Strategic Thinking

The Drucker Lectures is a recent book collecting some of the lectures of the late management expert Peter Drucker. Bloomberg Businessweek recently published online excerpts from this book, which is a must-read for fans of the late Professor Drucker. My wish for this new year—and for many to come—is that more and more companies and businesses would heed the management expert about short-term opportunity:

The question that must constantly be asked is: “If we are doing something because we see the short-term opportunity, will it make it more difficult for us to obtain our long-term results? Or will it help? And vice versa.”

There’s an old medical proverb that says it doesn’t help much if a sick, old woman is going into surgery tomorrow to save her life and she dies during the night. But it also doesn’t help if she survives the night and dies during surgery. So you have to have short-term results and long-term results, and the two have to be compatible and yet they’re different. And so this is the challenging task ahead of us. What are results? How do you define them? How do you balance them?

Now the fashion is to look at quarterly earnings only. But go back to the 1950s, when General Electric brought in Ralph Cordiner as CEO. He reorganized GE, and tried to think through how to measure its results. And Cordiner basically operated on the assumption that shareholders didn’t matter.

This was the prevailing belief—and reality—up until very recently, up until the rise of the pension funds over the last 10 years or so. Now, having these big institutional investors owning such a very large share of big American companies is not a good thing because the pressure is always short term. I’ve seen more mistakes being made so that the stock will be up five points or what have you. And I think that this is a very real danger. (1)

Drucker saw mistakes made and genuine danger in focusing on the short-term in general, and focusing on short-term profits and stock prices in particular. Unfortunately, our publicly-traded companies are obsessed with the short-term: shareholders, quarterly profits, and stock prices above all else.

If the esteemed Peter Drucker couldn’t influence people to look more towards the long-term, it’s doubtful that we at Barnes & Conti could. We have, however, noted a certain amount of buzz around the concept of “strategic thinking.” We’ve also given our venerable Strategic Thinking program a full revision.

Strategic thinking, almost by definition, incorporates long-term vision and goals in the process. Here’s our working definition:

…Strategic thinking (is) a flexible process, synthesizing critical and creative thinking. Strategic thinking is continuous rather than driven by events. It is focused on a desired result and is intended to develop, test, and decide on possible actions to achieve that result under continually changing conditions. (2)

The continuous nature of strategic thinking, the focus, and particularly the continually changing conditions, not to mention the nature of strategy itself, put us firmly into the long-term mode. Here’s to a New Year of strategic success and a focus firmly place into the long-term for all our friends and clients.

1) The Drucker Lectures: Essential Lessons on Management, Society and Economy, Peter F. Drucker, Rick Wartzman; McGraw Hill, 2010

2) Strategic Thinking, Barnes & Conti Associates, Inc., 2010