The Iroquois were governed by the principle that important decisions had to be made weighing not only their immediate effects but also how they would impact seven generations to come. Wall Street and the flash trading it created are dictating the opposite. Investors' and analysts' focus on quarterly profits is trapping CEOs in a 90-day cycle, making it hard for them to implement long-term strategies such as major technology shifts or product phase-ins. Venture capital and private equity, looking to maximize profits and then exit, have only added to the trend. CEOs' average terms are getting shorter, and they are often ushered out before they have the time to lay the groundwork for real value creation.
The 2008 financial crisis woke many to this paradox, and leaders in and out of the financial industry have drawn attention to the dangers of "short termism." But with an entrenched system incentivizing it, how can business be nudged back in the direction of Iroquois wisdom?
Here are a few thoughts on the subject for CEOs:
1. Long-term shareholders make better partners. Finance was originally supposed to support production and trade, before it spun off into a whole world of its own. The best financial partners are just that: partners. You want them to believe in your product and your strategy. You might find them in your local community or network, or through crowd funding. If your company trades on a stock market, you can still be strategic about courting certain types of investors, such as pension funds, who are more interested in your long-term plans.
2. Risk management and mitigation are important. Be articulate about explaining to your Board and shareholders why water scarcity, energy efficiency, or a disruptive technology will be important down the road. Purposefully shift their attention away from 90-day bean counting to the big picture. Take control of the conversation.
3. Shareholders aren't your only stakeholders. Healthy relationships with your customers, suppliers, employees, community and environment bring value to your company; focusing on all these stakeholders will bring your company the right balance of economic, social and environmental sustainability. We are now in an age where attention to the sustainability of all these stakeholder relationships improves the bottom line. This has been proven and you can prove it to your shareholders, too.
4. Use long-term thinking to put yourself forward as an inspiring leader. You want to help create a bright future for generations to come, so why not say so? Your job is to inspire, strategize, organize, and communicate. Your employees will be most productive when they feel a sense of purpose, and if you get the conversation going, they will all come forward with ideas on what to do for future generations. Inspire them to make changes at home, too, and in their communities. Make them feel connected. Tell them they are important.
Shifting to a longer-term focus couldn't be more urgent; it might be the key to your company's survival, renewal and resilience. And while you're at it, you might just be helping the world become a better place.