Over the last 5 years - in fact since the great recession hit - many companies seem to have concentrated on short term gains - and have rewarded their CEOs with generous bonuses for producing them. This is in response to a real or imagined investor need for quick results and dividends - to offset money they might previously have received in interest payments on part of their capital.
So, the CEO gets his/her bonus; the company makes profits; the investor receives dividends. What's not to like?
Well, this is a recipe for declining productivity - or at least non-rising productivity. Money is going out in these term payments instead of being invested in infrastructure, new capital equipment and new technologies. It is those kinds of investment that replace labour with capital and drive up labour productivity. It is those kinds of investment that have not been made in recent years.
Now, does this apply to your company. Are you under pressure for short-term results? Is that pressure real or imagined?
Perhaps you should find out. If your investors would accept a longer-term view, you could start to make those transformational investments and all would gain in that longer term.
So, the CEO gets his/her bonus; the company makes profits; the investor receives dividends. What's not to like?
Well, this is a recipe for declining productivity - or at least non-rising productivity. Money is going out in these term payments instead of being invested in infrastructure, new capital equipment and new technologies. It is those kinds of investment that replace labour with capital and drive up labour productivity. It is those kinds of investment that have not been made in recent years.
Now, does this apply to your company. Are you under pressure for short-term results? Is that pressure real or imagined?
Perhaps you should find out. If your investors would accept a longer-term view, you could start to make those transformational investments and all would gain in that longer term.
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