UK firms cautioned on 'short-term' business approach

UK companies are being forced to ditch long-term business strategies in favour of a short-term approach to running their businesses, often driven by the demands of shareholders and financiers, according to a new report.

The Now Management Report by Executives Online, a leading interim management and fast-track executive recruitment specialist, suggests that cost-cutting moves to rein in business plans could result in firms being poorly managed. The report found that:

• 30% of companies now plan on a six month or quarterly basis;
• 25% of firms now review budgets more often than annually;
• 17% of companies only invest when there's a guaranteed return within two years;
• 15% of firms say running their business is like managing a series of projects.

Meeting economic criteria appears to form the basis for this approach - according to the Now Management Report, 11% of firms say strategic decisions are made to satisfy the City and investors, rather than customers, whereas 10% of companies say financiers are now driving their business strategy.

However, short-term planning may be harming British firms, with many companies believing their management practices are suffering as a result. Almost two out of five managers feel they could be better at communicating their business vision, 26% say they could improve their strategic planning, 25% feel they could show more leadership and 24% believe they could be better at inspiring their workforce.

Short-term management is also limiting the skills available within companies, with 20% of businesses now keeping their permanent staffing to a minimum and 14% of firms slimming their senior team down to a minimum. As a result many companies have had to become more flexible in their staff recruitment, needing to rapidly find senior staff for projects or to solve issues within their business.

Norrie Johnston, MD of Executives Online, said companies should not lose sight of the importance of good managers in their drive to short-term planning. He said: "Whether we like it or not, 'now management' is a fact of life for many companies today. But our report shows that many managers are in danger of losing grip of their strategic business vision as they are forced to grapple with the day-to-day pressures of a short-term outlook.

"The proof is the growing demand for senior, highly skilled managers to head up short-term projects or act as trouble-shooters. But for this approach to be successful companies need to become more flexible in their recruitment policies - ironically, they have to develop a much more long-term approach to short-term management."

(CL)