Short term vs Long term planning

Quarter Se Quarter Tak (QSQT)

The task of continuously showing an ever increasing topline with a steady growth in the bottomline is akin to a tightrope walk across two skyscrapers without a safety harness– one representing the revenues and the other profits.

Managing the expectations of various stakeholders has become an onerous task indicated by periodic telecon with investors and institutional investors to continuously update on the business outlook and the earnings potential.

While the companies spell out short and long term objectives, increasingly it is becoming evident that the pressures to deliver in short term, overrun the policies required to deliver long term results. Most of the review meetings today start with earning per share (EPS) figures and the ability of the company to outperform on the stock market vis-à-vis its industry peers. Failure to do so in certain cases means the exit door for people at the helm of affairs.

Capital is scarce and the fight to attract it is becoming fierce. Mergers, de-mergers and changes in cross holdings instead of purely being governed by the necessities to increase capacities / reduce redundancies / arrive at synergies / increase business potential, are being undertaken to effect favourable changes in the stocks movements. Proceeds from sales of assets (fixed or one time) are being undertaken to shore up the top-line.

Companies are increasingly being driven by the expectations of the stock market and the pressures to meet them are signalling or defining the policy changes albeit short term. Increasingly the process of finalizing long terms policies or annual plans and then breaking them into small building blocks for the quarters are now being viewed in the reverse manner.

Are we then staring at a scenario where long term planning will pave the way for short term plans which will then need to be dovetailed, no matter how disparate in their approaches between quarters, to deliver desired results? While decisions related to corporate strategy shall continue to be the domain of the long term perspectives, will decisions related to business and marketing strategy become subservient to quarterly planning remains to be seen.

It is quite debatable to pick which of the approaches is meritorious. Classically, the approach with a long term planning view and then breaking down the steps into smaller time intervals seems logical. However, in a VUCA scenario where the pace of changes is very swift, having a quarterly planning perspective not only allows for balancing of the investor sentiments but also the external environment changes.

Strategy was long thought to be a sustained and continuous approach to create winning moments for the company in the long term, a set of policies cast in stone to be followed religiously. A contrarian view to the same is that since the external environment, which is beyond the control of the company, is changing continuously and companies are increasingly investing in internal factors especially employee skills, so then why should the strategy be cast in stone – shouldn’t it be piecemeal and flexible enough to wade its way through this maze.

Views please….

By: Sumit Singh

Dated: 23^rd April, 2015