Short-term Measurement, Si: Short-Term Management, Non
When I talk to audiences about Trust-based Selling®, I have found that the number one response is:
"This is all nice, and I personally believe it—but you need to talk to my boss and my boss’s boss. Things around here are just too short-term—and this is where I live. I cannot afford to ignore the demands for short-term performance; that’s my quota, those are the norms, I don’t have the luxury of building this nice long-term trust. "
Read on to hear my take. But first, here’s Starbucks CEO Howard Shultz’s perspective on short-term vs long-term strategy.
Schultz is the returning CEO of Starbucks. Returning, that is, to take over from Jim Donald, the ex-Walmart executive who succeeded Schultz a few years ago.
Starbucks, in the eyes of its employees and many stockholders, has faltered—its stock price down 55% since May 2006, its original coffee-house focus lost in a modern management obsession with cross-selling, efficiencies, and relentless incremental improvement.
Schultz has set about refocusing on coffee. Bye-bye efficient mechanical espresso dispensers, teddy-bears, cluttered counters, and breakfast sandwiches. Back to basics: trained baristas talking to customers, soft chairs, coffee.
But—most telling of all—Schultz says he’s going to stop reporting same-store sales to Wall Street.
In retailing, that is heresy. It’s what every analyst wants, and assumes they’ll “obviously” get.
Why’s Schultz doing this?
Because he doesn’t want Wall Street or his employees falling for the business fallacy of our era: the belief that you can’t manage what you don’t measure, and the more fine-tuned the metric, the more powerful the management you can bring to bear.
This is hooey, and Schultz knows it. Steering the car by short-term rear-view-mirror metrics has a way of making people lose sight. They end up managing the numbers for the sake of…the numbers. Yet Schultz also knows everyone believes this stuff. So he’s making everyone go cold turkey on metrics to enforce the idea that, as he puts it:
Long-term value for the shareholder can only be achieved if you create long-term value for the customer and your people.
He is so, so right.
There is nothing wrong with short-term metrics per se; what’s wrong is assuming that they demand short-term management. In fact, the best short-term performance comes from long-term management, executed consistently.
What would you rather invest in—a company that consistently urges its salespeople to get customers to buy in this quarter, to juice numbers up; or a company that consistently acts in the best interests of customers, without focusing on which quarter the P&L comes home to roost?
Here’s the reaction of distinguished Yale School of Management professor Jeffrey Sonnenfeld’s reaction to Howard Schultz’s strategy for Starbucks:
“Howard is a brilliant visionary and a genuinely compassionate human being, but he runs the danger of being trapped by his past…Entrepreneurs sometimes don’t grow with the business. You shouldn’t pretend the model can’t keep evolving.”
Well, I have a lot of regard for Sonnenfeld, and of course the future will reveal whether he’s right or I am—whether this is a case of focus on long-term values or a case of arrested development. In the meantime, I have two words for him:
You know, the guy who blew away the suit from Pepsi who came in to “professionalize” Apple after Jobs the entrepreneur had outgrown his baby. Anyone who invested in Apple at the time of Jobs redux is now wealthy.
Because it depends what you’re evolving. If you’re evolving the Frappucino, well, OK. But if that evolution is costing you in terms of values about long-term focus on employees and customers, then “evolution” is a fraud. It’s the short-term disease again, masquerading as "value."
Success is not a series of quarters strung together in sequence. It’s a long-term story divisible into quarters, with the same principles tying them together.
My answer to those who say, “Hey, I gotta hit the quotas, what can I do?” is as follows:
- Who owns your career? And if it’s not you, why’d you give it away?
- Make a 6-month deal with your boss—let me ride this trust thing for just 6 months, and then you can start hounding me on the metrics.
In 6 months, you won’t lose much—if anything at all—and you’ll begin to see big results.
You also might be surprised how much your boss roots for you.
And if (s)he won’t do it, well, that’s valuable information for you too.