THE STORY
Over the course of my long career, I’ve been through a lot of job interviews—from both sides of the table. Whether I was hiring or trying to get hired, I’ve seen the same trend—the average length of an employee’s stay at a company has shrunk.
In my early days, the general rule was that if you had spent
less than three years at your previous company, you were automatically seen as
a “loser.” To overcome this initial impression, the individual had to have a
very good story to explain why they were leaving after less than three years.
The general rule was to stay for five years or more.
Now, people label you as a loser if you spend more than
three years at a company. Today, if you stay at the same place for over three
years, you’d better have a good story to explain why you stayed so long. The
general rule now seems to be to get out in two years.
If you don’t believe me, take a look at a handful of resumes
on Linkedin. As you go through the career time-lines, most resumes will have
the time spent at a given company get shorter and shorter as you get closer to
the present.
It’s almost as if people’s careers have a half-life (like
uranium). Each succeeding job is half the life-time of the time spent at the prior
career location. It’s gotten to the point where about the only difference
between a short-term consultant and a short-term employee is who is paying for
the health insurance.
Traditionally, strategic planning has been concerned with creating a great long-term future for your company. But, if the key people only plan on sticking around for about two years, where is the incentive to work hard on building long-term improvement? Even for a five-year plan, a two year employee will have changed companies twice before the plan horizon is completed. For a ten-year plan, the two-year employee will have changed companies five times before the plan is over.
In this environment, the person setting up the long-term
plan is not incented to do it well, because they won’t be around long enough
for it to matter to them. And the replacement person who inherits the strategy
two years in has no emotional attachment to the plan built by people no longer
there. Usually, they abandon the predecessor’s plan before it gets traction and
start the process all over again. So you end up with a lot of half-hearted
planning starts, but no pursuit to the end.
As a result, I’ve witnessed strategy get perverted into
something that has nothing to do with long-term planning. It’s just a tool for
an employee to get a quick bullet point on the resume in order to get the next
job. And that’s not good for the company’s long term health.
Instead of real, long-term plans, one tends to get one or more of the following:
1. Lots of M&A
If you want to create a big bang in a short time, make a big
divestiture or acquisition. It’s the biggest impact you can have in the
shortest amount of time. That’s why activist investors are always pushing to
restructure companies—it’s the fastest way to push a change in the stock price.
Being part of large deals like that also looks good on the resume—a big
accomplishment in a short period of time.
Lately, there has been a steep rise in the amount of M&A
and restructuring activity. I think one of the factors pushing the volume up is
the short time horizon of the two-year employee.
“Strategy By M&A” may initially look impressive, but it
is rarely the best long-term approach as the primary force of strategy. Here
are some of the pitfalls:
a)
Most acquisitions fail
b)
There is more money chasing deals than there are good
deals, pushing up prices to levels where it is difficult to get a good return
on the deal.
c)
When you pay a premium for an asset, you are giving a
lot of the upside cash potential to the seller, while still keeping all of the
future risk for yourself.
d)
What cash doesn’t go to the seller often goes to
lawyers and deal-makers. This further shrinks the potential return for
yourself.
e)
The tough part of the deal is the integration phase,
and the short-timers won’t stick around long enough to make sure that gets done
properly.
f)
A lot of what you buy in a deal is their employees. If
their employees don’t stick around, what have you really purchased?
2. Bring Cash
Forward
Another way to look good quickly is to take a long-term cash
flow and compress it into a short-term cash flow. For example, a lot of state
governments in the US decided to sell their toll roads to private companies.
That way, instead of waiting decades to get their hands on the toll money, they
got a big check up front. Boy, does that ever look good on the resume to claim
that you got all that cash in such a short period of time.
That’s why a lot of retailers, most recently Sears, have
been selling their properties to mall developers and then leasing back the
property from them (called a “sale and leaseback”). They get a big check right
away from the developer. Similarly, I recently heard that Ohio State University
sold all of its parking structures to a foreign company for a huge paycheck.
What a great photo opportunity to be shown giving the company such a big check.
The problem with this approach:
a)
The buyers are not benevolent people. They expect to
get a handsome return on that investment. Therefore, you will never get paid
what the asset is worth—you will get paid its worth less the profit the buyer
expects to make.
b)
If the deal goes sour in the future, the buyer will
stick it to you in the future with higher rent payments. When Sears owns its
property, it has frozen its destiny. Now that it rents, it does not control its
destiny.
c)
Even if you get someone else to pay the rent (like
drivers for toll roads and students for college parking) these other people
will not be happy if they are taken advantage of by the escalation of fees by
the new owners. Who wants the fate of their customer satisfaction in the hands
of people who don’t care about whether your customers are satisfied?
3. Playing
Politics
Politicians love creating laws or deals where the tough
parts don’t occur until after they leave office. That way, the nastiness messes
up the career of the next office-holder, not them.
Short-term employees are increasingly borrowing this tactic
from the politicians. They are pitching plans where the big costs and/or big
benefits are not to occur until after the time where they plan to leave. That
way, the negative impact of the big costs (which have been pushed out) won’t
hurt them. And because the promise of the big return is pushed out, the
disappointment when the return is less than promised doesn’t hurt them, either.
They can blame that disappointment on the bad execution of their successor.
The goal here is not to make the company better long-term,
but to just push the bad stuff and disappointments out a little further, so that
the next guy gets the blame.
In an earlier blog, I went into more detail about the
problems of “hockey stick” plans that push everything into the future.
4. Project
Orientation
One thing that looks good on the resume (and can be done in
a short period of time) is the completion of projects. You can point to a
completed task and say, “Look, there is something I did.”
But completing projects and moving a company forward are not
necessarily the same thing. If all you want to do is check it off a list of
“projects to do,” then your goal is to get it done rather than try to move the
company forward.
For example, you may have a project of building a mobile app
for your company. Well, just because you got an app up and running does not
guarantee that it will help the company long-term. In fact, the best way to
guarantee that you get the project done quickly is to dumb it down into
something simplistic and not very useful. Trying to get the project integrated
into the business where it impacts operations is very messy and time consuming.
It increases the risk that the project won’t get done (so you cannot put it on
your resume). Therefore, the incentive is to not make it very useful.
Long term planning is very difficult to do when the key people only want to stick around for about two years. These short-timers will try to hijack the long-term planning process for their short-term interests. They will try to steer the process into:
a)
Too much M&A; or
b)
Shifting cash flow forward; or
c)
Moving horizons beyond their tenure; or
d)
Shifting to a Project Completion orientation.
Watch out for these tricks. They rarely lead to the best
long term future.
You harvest what you sow. If you are not planting any seeds for the long term, there will be nothing to harvest in the long term.
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