Friday, March 11, 2011

Corporate Diets

Quarterly Profits Obsession

Four enticing sweet desserts
I wrote last week
that long-term corporate health depends on more than repeatedly maximizing short-term financial profit.
So it was pleasing to find a piece a few days later referring to Nokia's current struggles that expanded on that idea:
Instead of maximizing profits, organizations should focus on optimizing sustainable effectiveness, driving financial, social and environmental outcomes over longer periods of time. So while Nokia’s quarterly earnings may not have won the battle of prevailing profits, they’ve certainly proven “sustainably effective” over the long run. From this perspective, Nokia’s financial performance has been consistently above average, and it is consistently rated one of the most sustainable organization on the planet.
The most interesting part was the suggestion that relentlessly setting BHAGs (Big Hairy Audacious Goals) in a quest for ever-more aggressive short term profits, eventually must fail:
Aggressiveness is not sustainable. It’s a perfectly acceptable approach in given situations, but as a long-term strategy, it fails every time. Just ask Enron, Tyco, Global Crossing, Napoleon, and Hitler. The drive to meet profitability expectations, a very short-term, quarterly obsession, is anathema to sustainability.
For some companies and their leadership teams, it's all about maximizing quarterly profit. Rather like a diet of sugary desserts, it creates a rush of energy, excitement leading to giddiness, and a buzz, both for those eating and for those watching. And then comes the crash. So much better to focus on long-term health and nutrition of the corporate body.

Businesses should eat their sustainability vegetables. Life may be uncertain, but it's self-indulgent and ultimately unhealthy to obsess on dessert.

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