Putting out fires is necessary, but it won’t deliver growth

If you think that business decisions have become a lot harder to get right recently, you’re right. Constantly shifting markets, supply chain disruption, macroeconomic challenges and geopolitical instability are challenging businesses across industry sectors.

It should be no surprise, therefore, that a survey conducted by Vendigital with C-Suite Executives at UK-based businesses found that almost half – 48% – said their decisions had been focused on short-term considerations in the past year. But is that a problem, or is short-term thinking the right thing to be doing at the moment?

During the Covid-19 pandemic, many businesses shelved their medium and long-term plans in favour of tactical, short-term planning. As markets began to recover, some found that sticking with short-term thinking meant they could be more agile in their response to market opportunities. In a way, ‘tactical agility’ had become a strategic goal.

The problem with getting stuck in fire-fighting mode, of course, is that you can’t see another way of doing things. You get stuck in a rut; doing the same thing, in the same way, with the same outcome. Without a medium- or long-term plan, Board-level decision makers are unable to look up and adapt the business model. Constant firefighting also means they are more prone to burn-out, which makes them less efficient and effective, and impacts productivity.

Signs that short-term thinking has become a problem include situations where the management team are prioritising perceived, short-term gains over any medium- or long-term benefit. For example, with skills shortages rife in many industries, attracting and retaining talented people has become a priority issue for many businesses. If managers react in a knee-jerk way by boosting recruitment activity and adding new hires, they could be missing an opportunity to understand what people really want and why they are leaving. Once this is properly understood, they could invest resources in developing an attractive workplace culture that is focused on nurturing, retaining and developing talent, backed by the right rewards and remuneration packages.

In a manufacturing environment, the same is true. Too much focus on short-term issues can make it harder for businesses to make the right strategic decisions. Take the classic example of poor customer service. The business might have plenty of stock and work in progress, but complete and on-time delivery (COTD) targets are not being met. Instead of increasing throughput to meet demand (which might seem the obvious thing to do), the business should take a step back and explore the root cause of the problem. Once the root cause is identified, which might be poor forecasts; no Sales & Operations Planning process or the wrong product being manufactured and stocked, a plan should be put in place to address it.

The C-suite survey also revealed the main reasons why some businesses are less focused on their strategic, long-term goals. The top three reasons given were ‘cost uncertainty’, ‘demand uncertainty’ and a ‘need to stay competitive’. Instead of seeing these as reasons to abandon medium- and long-term planning however, they should be doing the opposite. For example, costs are constantly changing anyway, but in the current climate it may be necessary to consider a wider range of scenarios for potential cost movements, and build this into forecasting models.

In a more complex and changeable world, it’s more important than ever that Boards set clear, long-term goals that are measurable and aligned to their mission and values. These goals must be communicated at all levels, from the boardroom through to the shop floor. Setting measures in the form of KPIs, with timelines and responsibilities attached, will help to keep everyone focused on delivery.

Only with the right strategic foundations in place, will Boards be free to dedicate their time and energy to innovation and refining their business model. For example, they could flatten their organisational structure to improve agility, invest in the development of data-rich, AI-powered platforms or look for novel ways to nurture talented people. All could improve their decision-making capacity and set them on the road to success.