The dangers of short-term strategy

There is a brilliant article in the FT about the long-term disadvantages that can accrue from setting strategy for short-term benefit. (If you don't have access to articles from the FT, you can get it, free of charge, via FT for Schools, which is well worth signing up for.)

The article looks at examples of businesses selecting strategies which appear to meet their objectives - for example, a clinic which selects patients that are the easiest to treat, in order to improve their successful results and so to increase their position in the industry’s “league table", which seems to make commercial sense - only to find that they lose out on the benefits of learning from treatment of the more complex patients, which could enhance their treatments of all patients in the long run.

Similarly, quality management systems such as ISO 9000 might increase short-term efficiency and productivity, but reduce innovation in the long-run. The costs savings from outsourcing might lead to loss of valuable knowledge within the organisation. The efficiencies gained from downsizing might have a detrimental effect on morale.

And the problem is compounded because the cost and efficiency savings are easy to quantify, so can gain traction within the organisation which is focusing on improving its profitability. But the less tangible benefits from innovation, expertise and morale are much harder to quantify, and so are more likely to be overlooked in investment analysis.

Which offers the best returns for stakeholders?