Being able to balance the short-term and long-term views is key for a leader. When chaos reigns and complexity is unmanageable, balance between a short-term stability and a long-term viability is tricky.
When the business is going well, focusing on the long-term view is pretty easy. We feel we don’t need to care a lot about the present. But, usually, the more troubles we have in the present, the more we focus on the short-term view, losing perspective about the future.
If maintained, that short-term view is not sustainable and has undesirable impacts on the business.
Undesirable impacts
A year ago, when the pandemic took over everything, many people went home to work. Companies had to adapt to the new circumstances, and they introduced new ways of working to face. Nevertheless, many of them didn’t take the changes for good, considering remote work as something temporal. All in all, they were only solving a short-term problem: maintaining productivity despite people were at home.
Few companies acknowledged the fact that the pandemic raised an opportunity to rethink about the way of working; and settled the conditions to maintain a hybrid working model.
That short-term view is still alive. According to research with more than 500 executives, 52% of C-suite respondents still expect their employees to be at the office at least 4 days a week. There is an evident disconnection between how employees see the work (they want a more work-from-home scenario).
As a result of this short-term view myopia, recent surveys have found that 40% of workers globally are planning to quit their jobs looking for better conditions.
Balancing short-term gains and long-term strategy
Lego group had been losing money for seven years (from 1998 to 2004). Sales dropped 30% and profit margins stood at -30%. During those seven years, the company’s executives worked on solving some short-term issues, such as costs peaking or availability of products, missing the changes in the supply chain field and retailers (their competitors worked on eliminating inefficiencies and focused on re-gearing for the big-box stores).
Once they realized they need to change, they established a new vision with two strong pillars: globalization and innovation.
Was Lego too diversified? Probably. And they had problems on making products available. Were costs an issue? Of course.
But their approach actually changed. They considered the company as a whole, taking care of every aspect: development, sourcing, manufacturing and distribution.
By establishing a long-term view, they became profitable (at least until 2017, when the saturation of their markets made them change their strategy again) and were able to solve all the main issues.
Generating value
The lesson behind Lego’s case is that leaders must generate value, in good times and in challenging ones. There is a big temptation, when in trouble, to address only the more urgent issues, forgetting about the purpose and the future. Even with the wind behind, you can lose perspective and try to capture market share instead of anticipating future customer needs.
In short, you will need managerial leaders taking care of the present and strategic leaders, taking care of the future working together, to ensure your company will succeed, balancing the short-term and long-term views.