Wednesday, June 8, 2011

Strategic Planning Analogy #396: Short Timer

I knew a man who spent his career in retail operations. To advance your career in that field, you have to move around a lot from city to city. First, you are an assistant manager in one store…then you move to be store manager in another city…then you move to become a district manager, then a regional manager, and so on. These people move more often than a career military person.

My friend said that for a large part of his career, he moved on average about every two years. When you move every two years, you become an expert in how to move. This is what he learned:

1) Always buy a “starter” (entry level) home. They are the quickest and easiest to resell when you have to move again.

2) Buy a home where everything is already fixed up to perfection (no “fixer-uppers”). Why? First, you won’t have time in two years to do all the necessary repairs. Second, a home in great shape now will probably still be in great shape two years later when you sell it. This way, my friend never had to bother with painting walls or repairing roofs and still had a great looking house that would be very easy to sell.

By following these rules, my friend made moving in and out as easy and effortless as possible.

When you know you are only going to be somewhere for a short time, you act differently. Before going into the situation you already have a plan for getting out quickly and easily. You make choices that a long-timer would not make.

In the case of my friend, he didn’t get emotionally attached to his homes. He just wanted something easy to buy and easy to sell. He didn’t want the responsibility of investing a lot of time, money and energy in fixing them up. They were just a place to temporarily sleep until he moved to the next temporary location.

A similar situation can occur when people chose where and how they will work. If employees (or even leaders) expect to be with the company for only a short period of time, they will make different choices. They will choose different types of jobs and companies go in with. They will look for places with a relatively easy and effortless way to get out. They will not get emotionally attached. In other words, they will treat the company just like my friend treated his houses.

For example, why try to tackle a difficult strategic repositioning if you only expect to be in the job for a little while (especially if you are a leader)? After all, repositionings are difficult work. And all that effort usually reduces near-term earnings. By the time the new strategy kicks in and financials rebound, the short-time leader will have already planned to move on.
So a short-timers will ask themselves: why put up with the difficult work and get blamed for the temporary downturn, just so the successor can get credit for the rebound? No, short-timers would rather choose a situation where things are humming along just fine and nothing serious needs fixing. They will avoid fixer-uppers…just like my short-timer friend and his houses.

The principle here is that long-range strategic plans are difficult to implement in a culture with a short-term orientation. The commitment needed to transform a business long-term just isn’t there when people plan to move on before the task is completed. Consider the fact that for many C-level positions, the average tenure is only three years or less (about the length of time my friend stayed in his home). That doesn’t provide much incentive for aggressiveness on implementing five-year plans.

In these cases, short-term people instead look for the easy, immediate return—something that will bear fruit while they are still around. Unfortunately, near term gains are usually fleeting. Often, they aren’t even true gains—they are merely borrowing from the future.

Remember all those government incentives during the great recession, like “cash for clunkers?” These incentives temporarily increased the sales of cars, appliances and houses, but when the incentives ended, the sales plummeted. As it turns out, that sales bump was not additional sales. It was merely future sales made earlier. A similar situation often occurs when businesses seek a short-term stimulus.

If you want large, transformational improvements which will last, you need to go beyond minor tweaks to the status quo. You need to implement transformational strategic initiatives. And that takes time.

Therefore, strategic planning cannot be satisfied with merely dreaming up a great vision of the future. The plans also need to address the barriers which can get in the way of implementation. And one of those barriers can be a short-term culture.

Here are some suggestions about how to overcome this barrier.

1) Hire Well
When hiring, look for people who not pre-planning their departure as a short-timer. Look for people with longer-term commitments, people who become more emotionally invested in the company. I know that lifetime commitments are a thing of the past, but at least you can weed out the worst short-term offenders.

I have seen this at high profile companies which look good on a resume. They are places people like to say they are from. They are a great step to somewhere else. If the only reason people want to be with you is so that they can use it on their resume to go somewhere else, then you shouldn’t want them on your team. They are merely mercenaries. Avoid them, as I have spoke about in earlier blogs (here and here).

2) Create Bridges to Larger Issues
If you want emotional commitment, give people a reason to get emotional. Create visions which transcend merely making money and embrace larger agendas and causes. Younger employees in particular are concerned about the impact the places they work for have on the greater society. If you link up to these causes, you can get greater commitment to achieve your long-term objectives. Even if they don’t have much emotional commitment to your firm, you can still tap into the emotion around causes that are meaningful to them, no matter where they work. Google has embraced “do no evil.” Wal-Mart has embraced “sustainability.” It can be done.

I spoke more about this topic in an earlier blog.

3) Change incentives
People tend to act based on the way they are rewarded. If you want to encourage long-term commitment, then create incentives which reward long-term gains. Bonuses can be stretched out over time. Rewards can be based on future stock prices. Payouts can be determined in part by outcomes which take place even after a person has moved on. Penalties can be placed on gains which are merely shifting sales forward. Perhaps long-term efforts can be diced up into a series of smaller steps, where achievement of smaller steps are rewarded.

I know these can be tricky to implement, but there are ways to at least put some rewards into a long-term pool which only pays out when long-term goals are achieved. That way, even if people aren’t there for the whole journey, they have a stake in helping make the journey occur.

Truly transformational strategies take time to implement. In a world where many employees (and their leaders) don’t plan on being around very long, trying to get effort around implementing the transformation can be difficult. Therefore, a portion of the strategic plan needs to address these barriers and find ways to encourage commitment to longer-term efforts.

I worked with a CEO who was close to retiring and did not want to take on major transformational efforts in his final years. Fortunately, the internal person who succeeded him as CEO had been listening and he implemented the strategy once he took over. What I learned from this was that sometimes you have to shift your strategic appeal from the current leaders to the next generation of leaders. After all, the next generation has more at stake in the long-term. So when you are going through the strategic process, make sure you include the future leaders in the discussion. They can be some of your best allies.

1 comment:

  1. Gerald Nanninga,

    Great post- I particularly liked your statement "Borrow from the future". You touch upon an immensely important issues, which is the distortion of long-term goals with the objectives of short-term leaders. You tackled this issue masterfully.