Matt Lewis: Why businesses should get off the short-term treadmill

Would you sacrifice short-term gains for running a sustainable long-term business? KPMG’s head of national markets for London explains why businesses should spend time planning for the future

Matt Lewis is head of national markets for London at KPMG.

Take a look around and it seems everything is about the short term. The hedge fund market is accused of short term speculation, retailers aren’t looking beyond their next quarterly rent payment, even football managers are under pressure to get instant results. But what about the future?

I was speaking to a recently retired (and very successful) CFO of a listed company who said how pleased he was to “get off the treadmill”. The need for quarterly reporting to the City meant there was a danger that more focus was put on short term targets than long term investment decisions. Such dangers increase when businesses are under pressure, understandably, when cash and costs need to be managed.

However, not everyone has the same mind-set. I deal with two family businesses, very different in size and operation but the one thing they have in common is that, like many family businesses, they take a long-term view about their business. One is looking at developing new products and is actively redeploying people from the front line into other areas that will have a longer term pay back. The other is in no mood to cut advertising and marketing spend and risk damaging its brand.

They’re also very conscious of retaining their employees and acknowledge the fact that if you lose your talent, you lose skill sets and pay a heavy price for re-hiring and re-training.  There’s also a more paternalistic approach – one of the CEOs pointed out an employee proudly and said, “She is the third generation of her family that has worked for us, it’s as much her business as mine!”

When you ask them what their top three issues are leaving aside any day-to-day pressures, they both said exactly the same things:

1. Succession planning

One business is moving to the second generation, one is several generations in.  It would be wrong to suggest everything has gone smoothly – it hasn’t!

2. Growth

Not in terms of next quarter’s results, or even next year’s, but a sustainable, long term business – one described it as handing on to the next generation something that’s better than they inherited.

3. Community

The view that, as successful businesses, they play an important part in the wider community and have relationships that themselves have lasted many years – with their suppliers, customers, and employees. And you feel they really believe it, rather than (cynically) to win a best employer award!

But are all businesses prepared to make sacrifices in the short term for the long term?

Clearly it depends on the financial health and motivation of the business. I have a friend who works in a successful family business that has a large property portfolio. Recently the business lost out on a tender to buy a very prestigious central London property and my friend was understandably disappointed because he put a lot of work and effort into it. But the Chairman said, “Don’t worry, it’ll be back on the market in 25 years, we’ll get it then.”

Everyone is under everyday pressure but the key question is: are you spending enough time to plan for the growth of your business in the longer term?

Matt Lewis is head of national markets for London at KPMG.