Planning for the long term

There are some mental traps business leaders fall into which restrict their ability to plan for and manage a high-performance company in the long-term.

by McKinsey Quarterly Online
Last Updated: 23 Jul 2013

One of the traps results from the fact that is often easier to plan something in the short-term than spend time on a big, far-off goal such as building a more customer-oriented culture.

Executives are usually pre-occupied with short-term performance outputs and are liable to feel that they cannot pin down long-term corporate health issues in a hard-nosed way. They may also assume that the big corporate health issues will emerge from the unknown sometime in the future and mistakenly believe that they cannot spot problems in their organisations in the present day.

There are five characteristics underpinning better corporate health management. The first is resilience, in which companies are well prepared for potential risks including low-probability, high-risk catastrophes. Wal-Mart, to take one example, was able to reopen 125 stores which were in the path of Hurricane Katrina because they had an alternative rail supply line ready to replace that of the road.

The second characteristic is execution, the ability to get the basics right, make good decisions and perform essential tasks.

The final three characteristics are alignment - being able to pull staff around one vision no matter where they are based; renewal - being able to invest in new markets where they can leverage existing competencies and assets, such as Nike's foray into golf, ice-hockey and soccer; and complementarities, in which assets, processes, relationships and management practices act in concert.

Anatomy of a healthy corporation
Aaron De Smet, Mark Loch, and Bill Schaninger
The McKinsey Quarterly Online, May 2007
Review by Morice Mendoza

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