TACTICS VERSUS STRATEGIES

In the United States, there is a great deal of pressure placed upon the CEO of a publicly traded company to meet analysts’ expectations on quarterly earnings reports. The Securities and Exchange Commission (SEC) require publicly traded companies to report all activity four times a year, with certain expectations with each filing. This requirement encourages executives to employ short-term tactics as opposed to long-term strategies. It also sometimes encourages executives to manage the stock instead of leading the company.

This is the wrong approach. Concentrating on the intended or expected outcome is the wrong focus of an organization. Concentrating on long-term strategies, which when successfully implemented will produce the long-term expected financial outcome, should be the focus of the Executive Committee. However, we are likely to see more short-term actions instead of long-term planning of our largest companies.

Because U.S. publicly traded companies are constantly focusing on the short-term results, they are often ill-prepared for cyclical changes in the economy, as clearly evidenced each day in the business section of the news.