Avoid Over-Reacting to Short-Term Data

Did you know that statistics indicate that short-term companies attract short-term investors and customers, which can create all kinds of potential performance pressures for leaders and employees? It is also a fact that the financial and strategic performance of short-term companies is more volatile and riskier than that of long-term companies.

Short-term thinking, primarily as it is associated with evaluating data being collected, can further complicate leadership decision-making processes. Too often, data is generated under high-pressure time frames and distributed without context or guidelines, resulting in ineffective strategies, unknown fallacies such as misinterpretation of trends or misjudgment of market conditions, and poor-quality delivery.

Today, we tend to make broad, sweeping statements and overgeneralize when discussing short-termism in business. Still, while significant short-termism exists, some organizations have developed a long-term-oriented approach through formal or informal institutions, including building the corporate culture and proactive employee selection.

Developing a high-integrity data infrastructure that separates valid and invalid data can have profound implications and incentivize companies to become more long-term-oriented.

Often, corporate leaders complain that the market is short-term, which influences them to overreact to input that is not well-digested or evaluated in favor of getting an answer published or a product to market before anyone else. Business leaders should be aware that focusing on the short term will attract investors and customers, reinforcing a short-term managerial attitude.

Communicating a long-term vision for the business and providing both positive and qualitative data is integral to building a sustainable organization. By adopting proactive, transparent, integrated reporting, which involves regularly sharing comprehensive and accurate information about the company’s performance and plans, a company can offer a holistic picture of the business and effectively communicate its overall long-term performance.

Short-termism arises because leaders and decision-makers may prefer decisions that yield short-term profits first. It worsens when the short-term benefits come at the expense of long-term value creation. It does not come out of the blue but is attributable to the uncertainty of future outcomes.

Takeaways: The longer the horizon over which a project is supposed to pay off, the greater the perceived uncertainty. Hence, corporate managers and professional managers begin to maximize short-term performance, short-term data focus, financial decisions, and compensation issues.

Remember, don’t overreact to short-term developed data. Stay focused on the long-term vision and the robust data infrastructure you’ve built.

Leadership Questions: Where do you spend the most time thinking about long-term and future growth or short-term tactical tasks? How effective do you believe your strategic planning process is? Remember, strategic planning is your tool for staying in control and making informed decisions.

Keys: |Application: Leaders and Employees |Status: Tactical |Duration: DNA Embed |Impact: High