At many companies, individual executives believe devoutly in the importance of balancing short- and long-term goals. But many of those same execs rue the failure of their firms to achieve that balance. Likewise, the idea of "earning customer trust" warrants a lot of discussion, but not the kind of dedication that would change a company for the better.
A new study by 1to1 Media investigated these concepts, along with others discussed in the latest book by Don Peppers and Martha Rogers, Ph.D., Rules to Break & Laws to Follow: How Your Business Can Beat The Crisis of Short-Termism. Peppers and Rogers challenge the unspoken rules that have hindered wise business decision making and highlight the Laws To Follow that, when practiced, will guide companies toward creating more value. And according to the study, 1to1 Xchange: Rules to Break and Laws to Follow, companies need to enforce some of the key Laws To Follow.
The first Law To Follow says that long-term value is as important as current sales and profit. While 58 percent of respondents strongly agree with the concept and 49 percent believe in its importance for their organization, only 13 percent perceive that their organization actually balances short-term results with a long-term perspective.
"Our biggest hindrance is our C-level management's instinct (or gut-level desire) to manage the organization tactically rather than strategically," wrote one respondent. Another said "incentives...lead some strong voices to be more short-term focused," a theme echoed by a different individual who noted that management gets "rewarded for short-term, not long-term value."
Another Law To Follow decrees that companies should earn and keep the trust of their customers. Eighty percent of respondents strongly agree with this law, and 68 percent think the principle is important to their organization’s success. However, only 27 percent strongly agree that trust-based customer relationships are in fact built in a deliberate manner within their organizations. "Lack of cohesive internal processes" and the "proliferation of customer touchpoints that are controlled by many different business units" are some of the obstacles identified by respondents to following this law.
Yet another of the Laws To Follow looks inward, saying that to earn your customers' trust requires earning your employees' trust. "Your employees will work to earn customer trust only if they trust you, their employer," Peppers and Rogers write in the book. Most respondents took an opposing viewpoint. Only 40 percent strongly agree with the Law, and only 39 percent think that building trust with employees is important to their organization's success.
Perhaps most troubling is that fewer than one in five (18 percent) strongly agree that their organization has in fact earned their employee's trust. Why? "Hiring, firing, laying off, hiring again, unstable management and leadership;" "changes in strategy/direction;" and "lack of company-wide communications and transparency" are among the biggest hindrances.
The final law analyzed in the study states that success requires constant innovation. The topic of innovation is all over the executive conference circuit, and is covered by many business trade publications as a key to long-term success.
Peppers and Rogers write: "To create real value for your business, your innovation has to involve more than just coming up with cool new ideas for their own sake. To focus on profitable innovation, you have to keep the customer's future behavior firmly fixed in your mind."
Only 33 percent strongly agree with the rule, while 23 percent see it as important for their organization; just 18 percent perceive their organization as adhering to the precept. The "demands of the day-to-day and the bottom line" and the "organizational understanding of which target customers we want to serve in order to innovate based on these target customer needs" are some of the issues with which participants in this study are struggling.
In the book, Peppers and Rogers introduce and teach 12 Laws To Follow. For the four mentioned in the research, the belief in the law by the respondents exceeds the importance of the law to the organization's success, which in turn surpasses the extent to which it is followed. This organizational 'knowing-doing' gap is largest for the law: "Earn and keep the trust of your customers."
"The most straightforward advice we can give business executives is to suggest that they change their mental models of what it means to succeed during the quarter," says Rogers. "Customer trust will help you beat the crisis of short-termism by providing a guideline for action even, if your financial metrics aren't sophisticated enough right now to be up to the task."
The important thing to know whether your decisions and actions lead to revenue this quarter that builds long-term value, or whether, as is the case for so many companies, the money you make this quarter comes at the expense of your future.
Read the 1to1 Xchange study, "Rules to Break and Laws to Follow."