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CEOs have always tried to balance short-term and long-term considerations, but the conditions that prevail today are more extreme than ever.
"In my view, adaptability is about managing your portfolio of business effectively, scanning the horizon for opportunities that may arise and making decisions on a continuous basis…"
Ralph Norris
CEO, Commonwealth Bank of Australia,
Australia
Many CEOs are confronting the biggest short-term challenges and uncertainties they have ever seen. At the same time, CEOs feel responsibility for a wider range of long-term issues than ever before.
Business leaders are speaking about the need for a change in mindset, which includes a different understanding of risk and return. The old mindset focused too much on quarterly results and exacerbated systemic risk.
Michael Smith, CEO of Australia-based ANZ, an international banking and financial services group asserts this: "In retrospect [the financial industry was] driven by short-termers," he says. "There was the holy grail of earnings-per-share growth, quarter on quarter, at any cost. That has, I think, driven behaviour which is not in keeping with good banking."
In addition to delivering quarterly returns, CEOs are trying to plan for and profit from global issues that will play out over generations. In the criteria for evaluating investments, the well-being of future generations ranks about the same as recouping costs. Close behind comes satisfying the needs of society beyond those of customers, employees and investors.
Andrew Cosslett, CEO of Intercontinental Hotels Group, speaks on an initative to reduce energy consumption which will have a positive impact on saving money and reducing environmental footprint.
When asked about specific global trends, a surprising number of CEOs said that the issues would have no impact on the long-term success of their companies. This suggests that some organisations have not fully internalised the implications of large-scale trends.
However, the more CEOs believe that the spread of infectious diseases (49 percent), the scarcity of fresh water (50 percent), overpopulation (55 percent), climate change (56 percent) and the world's dependence on carbon-based energy (61 percent) will have either a positive or a negative impact on long-term success.
Energy strategy is one example of long-term CEO thinking. As the financial crisis deepened and the price of oil fell, CEOs became less concerned about energy costs as a threat to their short-term growth. The shift in short-term focus, however, did not change their long-term strategy.
The opportunities to develop goods and services that capitalise on large-scale trends provide a powerful incentive for businesses to help find solutions to seemingly intractable global problems.
Almost one third of construction and civil engineering CEOs believe that climate change (29 percent) and the pressure on natural resources from population growth (30 percent) will have a positive impact on their companies' success.
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