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Managerial myopia or systemic short‐termism? The importance of managerial systems in valuing the long term

Managerial myopia or systemic short‐termism? The importance of managerial systems in valuing the... For more than two decades both the business press and research in several academic disciplines have seen an extended debate over what has been called “myopia” or “short‐termism”. These terms have been used to describe decisions in which firms pursue short‐term gains ( for example, seeking to maximize quarterly profits) at the expense of long term strategies ( for example, investing in basic research or laying the groundwork for new core competencies). Despite the attention to this subject, there remain conflicting positions in the business press and inconclusive evidence from research regarding causes and proposed solutions. This paper proposes that progress may be possible by looking inside firms – addressing how managerial systems and decision‐making processes affect the development of long term strategies. Survey results suggest that systemic elements – organizational culture, processes, and routines – have promised in understanding why firms may undervalue the long term and pay too much attention to the short‐term. This study finds that firms are less likely to undervalue the long term when they are able to manage tradeoffs between short‐term and long term results, and create a climate of trust that allows individuals to weather the short‐term setbacks necessary to achieve long term results. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Management Decision Emerald Publishing

Managerial myopia or systemic short‐termism? The importance of managerial systems in valuing the long term

Management Decision , Volume 42 (8): 14 – Sep 1, 2004

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References (34)

Publisher
Emerald Publishing
Copyright
Copyright © 2004 Emerald Group Publishing Limited. All rights reserved.
ISSN
0025-1747
DOI
10.1108/00251740410555443
Publisher site
See Article on Publisher Site

Abstract

For more than two decades both the business press and research in several academic disciplines have seen an extended debate over what has been called “myopia” or “short‐termism”. These terms have been used to describe decisions in which firms pursue short‐term gains ( for example, seeking to maximize quarterly profits) at the expense of long term strategies ( for example, investing in basic research or laying the groundwork for new core competencies). Despite the attention to this subject, there remain conflicting positions in the business press and inconclusive evidence from research regarding causes and proposed solutions. This paper proposes that progress may be possible by looking inside firms – addressing how managerial systems and decision‐making processes affect the development of long term strategies. Survey results suggest that systemic elements – organizational culture, processes, and routines – have promised in understanding why firms may undervalue the long term and pay too much attention to the short‐term. This study finds that firms are less likely to undervalue the long term when they are able to manage tradeoffs between short‐term and long term results, and create a climate of trust that allows individuals to weather the short‐term setbacks necessary to achieve long term results.

Journal

Management DecisionEmerald Publishing

Published: Sep 1, 2004

Keywords: Decision making; Organizational processes; Time‐based management; Short‐term planning

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