Are executives too focused on the short term?
Does it really matter if so?
Going long
In this edition:
A quick briefing in five—
or a fifty-minute deeper dive
Share this
The Economist says short-termism
is overblown, countering that capital spending and R&D are high while
activist investing is low.
A misdiagnosis?
Economist
Corporate short-termism
is a frustratingly slippery idea
Dive deeper
Dive deeper
Capital expenditure and R&D investments, $ million
2016
2012
2008
2004
2000
1996
1992
0
500
1,000
1,500
2,000
Source: Bloomberg; S&P Capital IQ; McKinsey analysis
Average
But a survey of executives suggests
that pressure to deliver short-term results is on the rise, leading to myopic strategies and other ills.
Feeling the heat
Report (PDF) - McKinsey Global Institute
Measuring the economic impact of short-termism
Dive deeper
Dive deeper
%
55
say their company would
sacrifice value to hit quarterly targets
Source: Rising to the challenge of short-termism, FCLT Global, September 2016
%
65
say short-term pressure
has increased over the past 5 years
%
87
experience pressure
to demonstrate strong financial
performance in 2 years or less
McKinsey research finds that
long-term-oriented companies in the
US outperform their industry peers against almost every financial measure.
Measuring
short-termism’s effect
Article - McKinsey Global Institute
Where companies with
a long-term view
outperform their peers
Dive deeper
Dive deeper
56%
36%
47%
Market
capitalization
Revenues
Earnings
Outperformance by
long-term companies
Companies can shift away from short-term thinking and pursue long-term value in part through alliances with sophisticated investors. Approaches include:
Stand together
Article
How to build an alliance against corporate
short-termism
Dive deeper
Dive deeper
targets
Resist artificial moves to meet earnings
—eg, deferring long-term investment
or reducing discretionary spending
comments and more Q&A
—fewer scripted
Rethink quarterly calls
about long-term strategic
priorities and objectives
Educate investors
Take a fifty-minute deeper dive
Economist
Corporate short-termism is a frustratingly slippery idea
Report (PDF) - McKinsey Global Institute
Measuring the economic impact of
short-termism
Article
How to build an alliance against corporate short-termism
Article - McKinsey Global Institute
Where companies with a long-term view outperform their peers
Subscribe
Sign up for weekly email briefings from the Five Fifty
Now that you’ve
read the five …
Share this edition
Back to top
Subscribe
Download PDF
Sign up for weekly email briefings from the Five Fifty
Download the Fifty: a compilation
of deeper dive articles from this edition
Now that you’ve
read the five …
Share this edition
Back to top
