My definition of what the aim of an organization is to “maximize returns for its stakeholders”.
But over what term? When we say short or long-term what does this mean and what are the implications for sustainability?
I started thinking about this when reading a HBR article “Capitalism for the Long Term: by Dominic Barton: http://hbr.org/2011/03/capitalism-for-the-long-term
If you take a typical business, what does long-term mean? Three to five years? This defines the strategic planning activities, allocation of resources, finance initiatives etc. What about a ten or twenty-year timeframe? This is typically unheard off in the West, but pretty much par for the course in the East, for the larger organization.
So how do these fundamental views of outlook impact sustainability? If we use the definition of sustainability as being the capacity to endure, then having a short-term outlook (you decide what short-term means for you) will shape your view on all activities including the purchase and utilization of resources including materials, people, machines etc. It shapes your finance initiates. Is the organization seeking suitable short-returns that may increase its exposure to risk, in the pursuit of these returns. This will shape an organization’s approach to sustainability and all activities associated with sustainable practices.
By its implicit nature, sustainability has a long-term outlook. If we take the Bruntland Commission of the United Nations, March 20th, 1987, view of sustainable development as being the “the development that meets the needs of the present without compromising the ability of future generations to meet their own needs”, then a long-term approach is certainly viewed here. So what happens when you are driven by the short-term? The very nature of the markets in which you operate may dictate this and take this out of your control. If the outlook is short-term, then what impact does this have on the sustainable considerations, your organization may be considering? Are the organization goals at odds with each other (short-term metrics such as profit and growth versus long-term goals as sustainability)
Barton’s article focuses on the West near obsession on a short-term outlook and if we were able to adopt and consider a longer-term outlook, perhaps this would create better foundation for creating and sustaining growth, profits, allocation and utilization of resources, financing activities, use of personnel.
If you are driven by short-term goals and measurement indicators, yet want to have a long-term sustainable outlook, what are you doing to maintain balance?