Although you might not have heard of the term before, you have probably been guilty of corporate short-termism yourself or have suffered the effects of it. Corporate short-termism is the tendency of businesses to take decisions based on short-term gains and results and in so doing to lose sight of long-term continuity.
Short-termism is a common is a common issue highlighted by consultants eager to push their services, but both managers and their consultants can fall victim to this ‘condition.’
There’s no better place to illustrate the effects of this condition by looking at corporations and their attitude towards Research and Development.
Here’s some facts:
- When firms shifted from “R&D as growth driver” to “R&D as an expense” their profit form new products and new markets dropped significantly. Ultimately cutting both the fat as well as the muscle.
- Tying research spending directly to short term profit concerns leads to a decrease of revenue per innovation of 50%.
- Firms with CEO’s who manage by the numbers have been shown to loose their innovativeness or in other words their ability to adapt.
In short, there is no sensible way to focus on the short term, it is just not a sensible approach.
So why is this ‘condition’ so widespread?
I believe a big part of the answer lies in the biology of our brain. As the world of business moves toward Big Data analytics and robotization, executives and consultants still make decisions using our prehistoric neural pathways.
Our brain is built to function in the high-stakes environment of prehistory, so it tends to judge all unclear situations as potentially dangerous. For instance, if you are in possession of a tool you’d better hang on to it and defend it vigorously. ‘Better get what you can now!’, our brain screams instead of waiting for more later. Our brain makes split-second judgments based on the now, creating all sorts of unconscious shortcuts in our thinking. These shortcuts are known as heuristics or, more plainly, as biases.
Neuroscience is increasingly revealing the workings of our minds to us. It has been shown that most of the behavior we previously believed to be rational is actually driven by our limbic or emotional brain and not by our rational neo-cortex. It’s time for us to start using this knowledge in business.
Four neuro-strategies to cure corporate short-termism
The following four simple neuro-strategies will help you to counter the effects of your and your team’s biases and cure corporate short-termism.
The critical reading checklist
1) The Critical Reading Checklist fights mental shortcuts by scrutinizing your thought process to ensure a point of view is valid, insightful, actionable, meaningful, exciting and bias-free.
What’s the point? Is your proposal customer-centered, needs-based and fact-driven? Who says? Is your position supported by findings from relevant stakeholders?
What’s new? What is the value your idea adds?
Who cares? How is it significant? Is it worth doing? If not, ask yourself why?
Mapping biases and fallacies
2) Mapping biases and fallacies will help you and your team stay grounded in facts and will ensure the quality of your dialogue. Over 50 widespread cognitive biases and fallacies have been identified, including the halo effect, recency, groupthink and the ad hominem argument. Map the most common biases active in your team and display this map at all meetings as a constant reminder of the mental shortcuts and unconscious errors in you and your team’s reasoning.
The ‘what-if’ technique
3) The ‘what-if’ technique asks you to come up with counterintuitive future statements that evoke a ‘yeah, right’ response. An executive team might, for instance, explore the question: ‘What if we could be as fast as fashion?’ Discussing this question challenges the convictions you have about your business, reveals hidden assumptions about what you can and can’t do and inspires creativity and innovation.
Separating facts from beliefs
4) Finally, separating facts from beliefs will filter out assumptions and enable you to focus on actionable facts. When making decisions, list all the elements of your reasoning and judge each elements to determine whether they are a fact or belief. It’s important to do this as an individual to avoid groupthink and social pressure.
If you need help to create an inclusive long-term strategy that fuels executions and delivers growth, we can help.