A Critical Doer understands time; long and short view
I grew up on a farm in North Carolina. There were two things that were never in short supply…hard work and colorful pearls of wisdom. One saying that I dreaded but have come to love through the years was generally invoked when I was trying to do something for short term gain but had long term detriment. Inevitably my father would say, “Son, don’t eat your seed corn” meaning don’t eat the corn today that represents the seed for next year’s crop.
A Harvard Business Review article highlights a dilemma that fits the eating your seed corn model. The article highlights corporations increasingly using cash generated from the core business to buy back stock shares and increase dividends rather than reinvesting it in the business and its people.
The premise of the article is simple. Stock buybacks and increasing dividends increases share value and cash to investors…which includes a board of directors that can fire the CEO. There’s nothing wrong with wanting a good return on investment…after it all, it’s why we invest. The part we’re missing though is the long term growth of a company when cash is disproportionately distributed to passive investors over fully invested members of the company. The opportunity cost in doing so comes in training, recapitalization, product development, and employee benefits that can help retain top talent in areas where continuity is critical.
Like all things, there is a balance that must be struck in order to succeed in the near term in a way that makes a long term possible. The key strategic question leaders must pose to directors, shareholders, and employees is how long do you want this company to be profitable for everyone? A consistent, steady message from the chief executive is crucial in managing expectations of shareholders, directors, and employees when it comes to reinvestment and distribution.
The Critical Doer challenge is recognizing the never ending leadership mission of bridge building. Both interests in this dilemma are fair and legitimate. Successful companies generally have a strong leadership message that links today’s decisions of rewards and sacrifice to tomorrow’s dominant position in the market place. Successful families have the same discussions in balancing near term and long term reward…seriously, the same discussion you have with your kids about their near term decisions that impact long term prospects are negligibly different from the ones that should be happening in corporate boardrooms.
In my next post, I’m going to pull this thread a little harder when it comes to how this behavior affects loyalty in organizations…but for now, look carefully at how your decisions impact both the near and long term time horizons. Ensure you aren’t eating your seed corn so that today’s meal…is your last. It’s what a Critical Doer would…do!
Reminder: you can get automatic updates from The Critical Doer by using the subscription widget at the top of this post. You can also follow on Facebook, Twitter, and Google+. I also encourage you to let me know what you think of the posts or share a story of your own using the comments section or email me directly at [email protected].