Short-term financials or long-term value: which is your business priority?
In the face of immediate short-term pressures and longer engrained business challenges, how far into the future are executives looking when creating their business strategies?
In today’s unstable geopolitical environment, responsive and responsible leadership is more important than ever, and this was the focus of discussions at the World Economic Forum 2017 in Davos. To better understand the role of business executives in this climate, and their views on pressing business issues, EY conducted a global survey via polling on social media.
Two of these polls looked at the importance of short-term financials and long-term value creation to better understand the driving force behind business strategies and behaviors across the world.
Executives across the world clearly feel long-term value creation is the highest priority for themselves and their organizations. In every single region across the world, executives rated long-term value as a greater priority over short-term financials.
This view was most prominent in the Netherlands, where 80% see long-term value creation as the highest priority, while only 55% in the UK and Ireland held the same view. Given the enduring nature of many of today’s greatest problems, this prioritization of long-term value is a highly promising finding.
Pressure to deliver
While executives and organizations clearly view long-term value as the highest priority, this is in stark contrast to what they feel pressured to deliver in their daily work – short-term financials, which is too often measured and encouraged through short-term KPIs and quarterly reports.
In regions across the world, executives felt more pressured to deliver short-term financials over long-term value. The pressure to deliver short-term financials was most pronounced in Canada, where 90% of executives expressed this view, while those in Middle East and North African countries (MENA) were the least likely at a still very high 56%.
This poll finding suggests short-termism still dominates both the boardroom’s business strategy and the behaviors and actions of those at the frontline of revenue generation.
A business world that prioritizes quarterly reports above all else is unable to properly contribute to the creation of a more inclusive economy. To solve the long-term, deep-engrained and highly complex problems that face our societies today, we must not only prioritize long-term value – we must also reward those who create it.
And if organizations are to play a central role in solving these pressing issues, they must look beyond simply maximizing profits and shareholder value. This is where purpose can play its part. Organizations that have a clear purpose are able to build long-term value for themselves and other stakeholders – all without having to overly jeopardize their short-term performance.
However, it is important to communicate a clear long-term plan that resonates with stakeholders in order to get to this position. It is imperative to earn their buy-in and secure their continual support throughout the transition period to a long-term business perspective.
The polls were carried out on social media using EY’s different country handles, but voting was not restricted by country or region.