Does Managing for the Long Term Pay Off?

Yes, say Dominic Barton, James Manyka, and Sarah Keohane Williamson in an HBR.com article. They describe new research showing that U.S. “companies that operate with a true long-term mindset have consistently outperformed their industry peers since 2001 across almost every financial measure that matters.” For the firms identified as focused on the long term,

  • Average revenue and earnings growth were 47% and 36% higher, respectively, by 2014.
  • Market capitalization grew faster.
  • They created 12,000 more jobs, on average, from 2001 to 2015.

The authors estimate that “U.S. GDP over the past decade might well have grown by an additional $1 trillion if the whole economy had performed at the level our long-term stalwarts delivered — and generated more than five million additional jobs over this period.”

And a number of these companies didn’t begin the study period with a long-term focus: “Leaders at the companies in this cohort managed to shift their corporations’ behavior sufficiently to move into the long-term category.”

How to move to a long-term focus, or maintain one in the face of short-term pressures from boards and investors? The authors plan to explore the practical actions these companies took to do this.

Meanwhile, a place to start is the Baldrige core value Focus on Success, one of the values that underlie the Baldrige Excellence Framework’s Criteria for Performance Excellence:

Ensuring your organization’s success now and in the future requires an understanding of the short- and longer-term factors that affect your organization and its marketplace. Ensuring this ongoing success requires … balancing some stakeholders’ short-term demands with the organization’s and stakeholders’ needs to invest in long-term success. The pursuit of sustained growth and performance leadership requires a strong future orientation and a willingness to make long-term commitments to key stakeholders—your customers, workforce, suppliers, partners, and stockholders; the public; and the community. It also requires the agility to modify plans when circumstances warrant.

This value is reflected, for example, in Criteria questions about strategy development (asking for short- and long-term horizons and how you balance them), action plans (both short- and long-term), workforce (preparing your workforce for change and building a high-performing, engaged workforce), customers (engaging them for the long term), and measurement (asking for short- and longer-term measures),  among many others.

The evidence is in the job and revenue growth of two-time recipients of the Malcolm Baldrige National Quality Award. And for inspiration on the “how,” see the experiences of current and former Baldrige Award recipients. To learn more, register now for the 29th Annual Quest for Excellence Conference, which will feature the 2016 Baldrige Award recipients and many more national role models sharing their best practices.

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About Ellen Garshick

I’ve been on the Baldrige staff since 2007 as a writer/editor, working on projects ranging from the Baldrige Excellence Framework, case studies, training materials, aspects of the Baldrige Award process, and many others. My background includes a BA in French from Cornell University and an MA in teaching English as a second language from Georgetown University, as well as 30 years of experience writing, editing, and producing all kinds of publications. Other interests include baseball and genealogy.
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2 Responses to Does Managing for the Long Term Pay Off?

  1. Barry Johnson says:

    Ellen welcome to Blogrige.

    I am not sure that this research translated well to users of the Baldrige Framework. The sample was only for-profit companies grossing over $50B. (It’s been along time sine we saw one of those.) They only looked at 5 “selected” financial measures (that are not commonly reported by Baldrige applicants).

    The authors say this about the limits of their research.

    “We aren’t saying that a long-term orientation CAUSES better performance, nor have we controlled for every factor that could impact the relationship between those two. All we can say is that companies with a long-term orientation TEND TO perform better than similar but short-term-focused firms. Even so, the correlation we uncovered between behaviors that typify a longer-term approach and superior historical performance deliver a message that’s hard to ignore.”

    All in all, there are significant factors that mitigate the usefulness of this research.

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