Taking the The Long View to Profits

The long view in business is supported in a new book for its overall ethical benefits as well as the financial rewards it brings.

The argument is underpinned with a sprinkling of household names in Go Long: Why Long-Term Thinking is Your Best Short-Term Strategy.

The recommended approach is neatly encapsulated in a quotation from two of the four authors: “Chief executives who adopt long-term strategies eventually help their companies become more profitable, have happier employees and shareholders, and become better corporate citizens.”

It brings the vital people on side, say Professor Michael Useem, director of Wharton’s Center for Leadership and Change Management at Pennsylvania University, and Brian Dumaine, founder and editor-in-chief of the publisher HighWater Press, headquartered in Winnipeg.

The strategy has gained ground in European as well as US businesses and is a feature of policies in a number of large well-publicized companies.

The Swedish fashion house H&M is an example of the policy common in the garment industry, says Frederik Dahlmann, associate professor of strategy and sustainability at Warwick University.

The long view is taken in these businesses to a large extent because the merchandise has a fast turnaround and waste has to be controlled, he says.

Retention of valuable employees is another issue that requires long-term thinking. A sensible view is to take account of the ability and ambitions of staff who can be of use to a company.

There can be waste because employers don’t invest in people, says Dahlmann. An attitude of “exploration not exploitation” can be helpful.

Good examples given by Dahlmann include the UK multinational public transport company Arriva, the Derby-based car and aero engine manufacturer Rolls-Royce, the German manufacturer Siemens and the US conglomerate General Electric.

However, the security offered by public ownership does not always bring stability. Dahlmann cites the case of the mainly state-owned German vehicle maker Volkswagen, which ran into trouble after an emissions cheat.

In the US, the book’s authors show that industry bosses with a long-term strategy have natural allies in their institutional backers, who have voting muscle and are also long-term investors.

The book’s best examples include the international vehicle maker Ford, the UK-Dutch transnational consumer goods company Unilever and the retail pharmacy and healthcare group CVS Health, based in Rhode Island.

The most prominent long-term thinker named in the book is Warren Buffet, the success of whose conglomerate holding company Berkshire Hathaway is reflected in the bottom line. Profits at the company managed from Nebraska were compounded at 21.6 per cent a year from 1964 to 2014.

More evidence is in Buffet’s personal wealth. He is listed as the world’s fifth wealthiest individual in the 2018 annual register of fortunes, The Rich List, published by The Sunday Times newspaper. His value has grown to $82.7bn (£62.2bn, €71bn).

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