One of the great scourges of our age is “short-termism.” Too many leaders get caught up in the game of manipulating numbers and burning people out in an aeffort to meet the expectations of Wall Street or short-sighted executives. A staggering 78 percent of the managers surveyed in a large-scale study of CFOs and CEOs admit to sacrificing long-term value to achieve short-term smoother earnings.
According to Sheila Bair, former chair of Federal Deposit Insurance Corporation, “The common thread running through all the causes of our economic tumult is a pervasive and persistent insistence on favoring the short term over the long term, impulse over patience.”
Some companies succeed by pulling out all the stops and sacrificing the long term for the short term. They cut corners or abuse some stakeholder group in order to gain temporary advantage. Eventually, they face a rude awakening. They realize that they cannot sustain such manufactured gains because they borrowed from a future quarter or depleted precious assets.
It is one thing to achieve success for a while. It is another thing entirely to achieve success ethically and to sustain it over time. What we call “triple crown leadership” focuses not just on results, but on building an excellent, ethical, and enduring organization—the three legs of the triple crown quest.
“Enduring” means standing the test of time and operating sustainably. “Sustainability” is a buzzword these days that means different things to different people. To us, it means proper stewardship of people and resources.
Thankfully, there are examples of organizations that reject the siren call of short-termism and instead play the “long game.” Many of the 61 organizations we interviewed for the book Triple Crown Leadership have impressive track records dating back centuries: Princeton University (1746), Perkins School for the Blind (1829), GE (1878), Mayo Clinic (1889), and Coleman Corporation (1899).
It appears that some of today’s tech titans are joining this quest as well. In their 2004 IPO letter, Google cofounders Larry Page and Sergey Brin wrote:“As a private company, we have concentrated on the long term, and this has served us well. As a public company, we will do the same. In our opinion, outside pressures too often tempt companies to sacrifice long term opportunities to meet quarterly market expectations. Sometimes this pressure has caused companies to manipulate financial results in order to ‘make their quarter.’ In Warren Buffett’s words, ‘We won’t ‘smooth’ quarterly or annual results: If earnings figures are lumpy when they reach headquarters, they will be lumpy when they reach you.”
When Amazon went public in 1997, its founder and CEO Jeff Bezos issued a manifesto in which he wrote that “It’s all about the long term,” and that the company is focused on building “something that we can tell our grandchildren about.”
And in a Wired interview, Bezos said: “If everything you do needs to work on a three-year time horizon, then you’re competing against a lot of people. But if you’re willing to invest on a seven-year time horizon, you’re now competing against a fraction of those people, because very few companies are willing to do that. Just by lengthening the time horizon, you can engage in endeavors that you could never otherwise pursue. At Amazon we like things to work in five to seven years. We’re willing to plant seeds, let them grow—and we’re very stubborn.”
Core concept: Aim not only to be excellent and ethical, but also to endure. Ensure that you achieve results ethically and that your results and impacts are sustainable.