Long-term Planning

In business, and really just life, it’s important to plan for the long-term.  In a lot of publicly-traded companies, managers have incentives to manage for the short-term: if they boost the company’s numbers for the year, they get huge bonuses. The plan doesn’t account for the fact that they may well have gotten there by sabotaging the company’s future.

But the long term is different from the absurdly long term. I’m sitting here reading an article about how Merrimack needs to replace its manhole covers. There are two plans; one is very expensive but will last us 50 years. The other is significantly cheaper, but there’s a chance that, in a couple of decades, they might need to be replaced again.

I guess the right way to look at it is the total cost over time. But frankly, in 20-25 years, I’m going to be in my 40’s, and probably not living in Merrimack. I’m not going to think, “Man, I wish we’d spend more on manhole covers.” I won’t even remember that we replaced them 20 years ago.

One of my classes this semester is called Strategic Management. Some classmates presented their “strategic recommendations” for a golf company. One of their plans was aimed at growing the company’s market share over 100 years. I had to choke back my laughter when they said this.

It’s important to plan for the future. Doing something that you know will endanger your company in the future is a bad idea. You always want to be thinking of the future. But how can you know what the golf industry is going to be like in 50 years? How can you know what the economy will be like? For a five-year plan you can infer that it won’t change too much, besides a little technological advancement. But if anyone ever gives you a 100-year plan for their company, I encourage you to crack up laughing. I almost did, at least.

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