The Value Of Long-Term Thinking (and The Fallacy of EPS)

Think about the most successful individuals you know. Now describe them in terms of their approach to life.

Since I can't read your mind, I'll start with three people I know. One's an entrepreneur, one's a sales and marketing person for a large corporation and one is a senior-level executive for a billion dollar region of a massive corporation. All three have a few basic principles that they put into practice everyday. They don't shift with the current trends or fads. They stick to what they think is the right approach and by doing so over the long-term all three have built extremely successful careers and family lives.

Now think about the most successful organizations you admire.

My selections would include Wal-Mart, Southwest Airlines, GE and Berkshire Hathaway. All three have very simple and clear approaches to the marketplace and they have stayed true to their approaches over the long-term in both good times and bad.

One more example.

Think about the difference between these two events in the history of The Walt Disney Company: In 1950, Walt Disney said, "We are in the family entertainment business. Our job is to entertain all members of the family," and in 2003 The Walt Disney Company made a television show called "Who's the hottest person in America?" in order to boost ratings. The first approach built an empire, the second one was canceled within a month.

For some odd reason, Americans are still obsessed with short-term results even though most of us know that to be truly great at anything we need to stay the course over the long-term. I recently heard a former COO of a large utility company explain it this way: "The reason corporations can't stick to a solid plan for the long-term is because of EPS, earnings per share." Apparently, the obsession with maximizing short-term EPS causes executives to try every stunt known to mankind including some of the extremely illegal variety.

Now think about the amount of shareholder value that was lost at the following companies because of this obsession with maximizing short-term EPS:

Enron, Sprint, HealthSouth, Andersen, Worldcom, Adelphi, Visa, Mastercard

Meanwhile, Southwest Airlines continues to be the most successful airline company in the world, Wal-Mart is the largest and most admired company (by Fortune 500 magazine) in the world, GE continues to put its imagination to work, and Warren Buffet just keeps on trucking.

The irony is that we build EPS by focusing on the long-term and ruin EPS by focusing on the short-term.

When will we ever get it?

I would like to introduce an alternative acronym: SPG, sustainable, profitable growth.

The key to driving sustainable, profitable growth is to focus on the long-term and execute in the short-term. Clarify your strategy that you will stick to over the long-term and then stay the course. Don't change your approach based on a daily, weekly or quarterly EPS or feedback from your boss. Use these indicators as indicators not dictators. Think about what this feedback is telling you and incorporate that into your movements going forward. But don't completely change your approach just to get a short-term gain. It's the ancient story of the tortoise and the hare. The hare bounces out front, but so what? It's winning the race that counts. Imagine two people want to go from Los Angeles to New York City. The first person hops in their car and starts driving at 80 MPH. Their short-term EPS is extraordinary. The second person makes a few calls, determines the best flight goes out tomorrow morning. For the first 24 hours the first person is kicking butt. He or she seems way ahead of the game. However, the second person gets there two days earlier. The student who gets an A on the first quiz of the year and then fails the course is not better off than the student who fails the first quiz but gets an A in the course.

Stay the course!!! (no pun intended)

Take care and have a great month!

Dan Coughlin

Accelerate Update This section is always current to the current month

I suppose every book changes an author's life to a certain degree. My first book, which was self-published in 1995, was called Inside Out: A Catalyst for Conscious Living. It's out of print now for a number of good reasons. The layout, which yours truly did, looks like something a first grader could do today. And the ideas are very theoretical, which doesn't fit my approach anymore. However, I read the book a few months ago, and I was pleased by how clearly I had explained my early thoughts on improving performance.

My second book, Corporate Catalysts: How to Make Your Company More Successful, Whatever Your Title, Income, or Authority was published in 2005 by Career Press. That book was a step forward in clarifying my ideas on improving performance and understanding how to write a whole book. It's one thing to dream about getting a book contract and another thing to write a 70,000 word manuscript.

My third book, ACCELERATE: 20 Practical Lessons to Boost Momentum, which was published in May 2007 by Kaplan Publishing, has changed my business dramatically. Up until that book was published, I mostly did projects for four companies: McDonald's, Marriott, GSD&M, and Toyota. In the past 12 months, I've worked with business owners, executives, and managers within dozens of small, medium, and massive organizations in more than 20 industries ranging from boats to banks to software to financial services to trucking to lighting to home healthcare to hospitals to optometrists. It's been an exciting adventure.

If you want to see my speaking calendar for 2008, which we'll try to update every two weeks, please click here.

Currently, I have 66 speeches scheduled for 2008. If you would like for me to speak at one of your events in 2008 or 2009, feel free to contact me at dan@thecoughlincompany.com and I will be glad to see if we can make it work.

If you want to see my speaking topics and a video of footage from some of my keynote speeches, please click here.

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