The Long-Term Danger of Short-Term Goals

Nov. 2, 2016
Capitalism cannot thrive if we remain focused on short-term profits at the expense of long-term sustainability.

There is a great divide between bossing—or managing, supervising, or whatever term you choose to use—and leading. Leaders do what they say they will do, take responsibility, follow through, make decisions based on facts, and develop goals that lead to sustainable growth and long-term profitability. In other words, they have integrity.

In my book, Truth, Trust + Tenacity, I discuss how integrity is one of the key characteristics of leading. It sounds obvious, but often isn’t. Those at the top, as well as others within organizations, can feel compelled to cheat, lie and manipulate facts to meet unreasonable goals. Because most organizations are performance-based, there is a built-in temptation to do what you must do to meet goals—even if those actions are unethical or illegal. A perfect example of this is the Wells Fargo Bank scandal, in which bank employees pressured to meet sales goals fraudulently created fake accounts to boost their numbers.

The rising level of duplicity by employees in order to meet performance goals is often, in my opinion, being driven by unreasonable performance expectations.  I always developed goals with my direct reports that would certainly stretch and challenge them, but they were not so unrealistic as to encourage cheating.

I am a firm believer in capitalism but capitalism cannot thrive if we remain focused on short-term profits at the expense of long-term sustainability. This is a view I first heard from a professor of mine at CSU-Sacramento years ago.

While there’s no question that for-profit businesses exist to make money, a sole focus on this often ends up having the opposite effect. What’s even worse is that this approach causes business leaders and their team members to make decisions that may not be in the best interests of the organization, its shareholders or its employees. Performance-based compensation should not be designed to encourage employees to engage in dishonest or illegal behavior because they fear for their jobs.

To quote Peter Drucker, “Effective leadership is not about making speeches or being liked; leadership is defined by results not attributes.” Taking Drucker’s observation one step further, the difference between a genuine leader and a boss is that he or she understands that those results are reasonable and lead to long-term growth.

One company I’m familiar with that understands sustainable growth is The J.M. Smucker Company. Profitable for more than 100 years, the organization focuses on sustainable growth and reasonable expectations. There is very little, if any, focus on quarterly results. Their approach to business enables them to focus on integrating new products successfully, and not having to chase trends to keep up with, or meet, quarterly expectations. Employees know they can focus on doing things the right way.

Compare this to Wells Fargo, and what transpires when an organization focuses more on short-term profits that result in unreasonable expectations. The kinds of goals and expectations the financial institution imposed on employees led to cheating and illegal behavior.  The result was the dismissal of more than 5,000 employees, Congressional hearings, a tarnished brand, a loss of business from the state of California and others, and the exit of the firm’s CEO. Wells Fargo employees were essentially backed into a corner, and forced to do whatever necessary to meet unrealistic sales expectations. While I do not condone the behavior of the individuals who cheated at Wells Fargo in order to keep their jobs, the buck stops at the chief executive. Unfortunately, it did not—until he was caught.

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