Can the Board afford to have a myopic focus on a single variable?

The Board of any organization has the responsibility of looking at the long- term viability of an organization. It cannot be merely fixated by the near- term profit motive. While profit in the short- term is a necessary, it cannot be the only criterion by which the Board can judge the success of the organization. In fact, the complexity of the responsibility for the Board lies in the fact that it has to juggle multiple variables on which it has to focus on. It is a fairly simple task to focus on only one variable but then if it were so simple, then one may not need all the experience and wisdom of a Board members to steer an organization. Yet, there are instances when an otherwise mature and erudite Board of Directors get myopic with one variable at the cost of overlooking the others and consequently end up jeopardizing the long- term viability of the Organization by its own acts of omission. While profits may be crucial life line of an organization, but so is market share, so is customer satisfaction, so is talent attraction & retention, so is capability building for the future. The challenge is that some of them may be quantifiable in dollar value and some may not be; some may have an immediate impact and others may have a longer gestation period but in neither case does it justify to neglect one only because they do not have an immediate impact or they cannot be measured in dollar value.

Leadership is the art of balancing multiple variables at the same time when some of them may have contra effects on each other. The point is not to deny the contra- impact of some of the variables but to recognize the same. Leadership, at the end of the day, of all about balancing on the one hand, and making choices on the other. It is the balance between the long- term and short- term on one side and the balance between priorities which are quantifiable with those that may not be so. Organizations that are built to last* or those that go from becoming good to great*, are able to do so much better than the others (*Jim Collins from the books by the same names). If doing these in the real world were as easy as writing them on a piece of paper or talking about the same in a lecture hall, leadership would not have been such a complex and difficult subject to practice.

This inability to balance the long- term with the short –term or those metrics which could be quantified with those which could not be, led to the downfall of an organization which was otherwise doing well for a number of years. This example is just the opposite of what Jim Collins described as an organization which is built to last. It focused narrowly on the immediate profiles, completely ignoring all other aspects which would define the success of the organization in normal parlance. It did not consider market share as a goal worth pursuing until of course it was left so far behind that catching up to retain the same position was almost impossible. There was a certain level of arrogance amongst its senior management which percolated right down to the front line which was gravely injurious to customer retention, let alone customer acquisition. It continually fell short of repeat customers but it did not seem to bother as long as the bottom line was healthy. While its competitors were investing in technology all the while, this organization prided itself in being able to maintain a healthy bottom line and having good cash reserves without investing in technology which its competitors were doing. Building talent for the future or paying attention to the fact that it was continuously losing good talent and unable to attract talent which would be necessary for success in the medium to long term featured as the last item on its agenda, only to be given a lip service once in six months. To be fair, this organization did make a choice but the choice was short term at the expense of the medium to long term; choice was for immediate profits as compared to long term viability of the organization. The Board was decidedly interested in the immediate here and now instead of focusing on making the organization customer oriented.

There are absolutely no prizes for guessing the end results. While for a short period, the organization did deliver what its Board was looking for, however the fault lines were not too far in the horizon. In its intense desire to make immediate profits, it lost market share all around and the realization came a trifle too late when the water had crossed well above the danger mark. The lack of customer orientation started showing its symptoms long ago but by the time the organization realized that the malaise has taken a toll beyond repair, it was too late. Lack of investment in technology continually showed its impact of poor quality of the product which the organization turned a blind eye and deaf ear to until it was too late. The lack of ability to attract and retain high caliber talent from outside was almost treated as a non-issue until it was realized that the in-house talent was unable to deal with the issues at hand. Finally, all these ultimately had an impact on the single factor on which the Board was focused on all this while- profits. Ironically, in its myopic approach on focusing only on profits, the organization ended up losing that very battle!

This irony plays itself out more often than not when the focus is too myopic. Focus on a single variable and deny the existence of others as if they did not exist and one may end up jeopardizing that very variable which one was focusing on because the reality is that there are other variables in the equation, and like it or not, each of them have an impact on the others and one can refuse to acknowledge the same only at one’s own peril.