Corporate Influences

This section explains Corporate Influences covering, Corporate Timescales: Short-Termism versus Long-Termism and Evidence-Based versus Subjective Decision Making.

Corporate Timescales: Short-Termism versus Long-Termism

In the context of business strategy, timescales refer to the length of time over which businesses plan and make decisions. These timescales can significantly influence a company’s decision-making process, shaping everything from investments to corporate objectives.

• Short-Termism refers to an approach where companies focus primarily on immediate gains and short-term results. This often involves prioritising quarterly profits, rapid returns on investment, or immediate financial outcomes. Short-term decisions may include cutting costs, reducing workforce, or increasing sales in the short run, but they can sometimes come at the expense of long-term sustainability. Companies that prioritise short-term gains may neglect research and development, employee training, or innovation, which are crucial for long-term success.
• Long-Termism, on the other hand, involves making decisions that are aimed at sustainable growth over a longer period. Companies that adopt a long-term view are more likely to invest in projects that may not offer immediate returns but could provide significant benefits in the future. This includes strategic investments in technology, branding, corporate social responsibility (CSR), or expanding into new markets. Long-term strategies also focus on developing strong relationships with employees, customers, and other stakeholders, which can build lasting value.

Example: A business that focuses on boosting quarterly earnings by reducing costs or taking on high-risk ventures, without considering the long-term impact, could be described as engaging in short-termism.

Example: A business that invests in renewable energy sources, even if it involves short-term costs, with the goal of positioning itself as a leader in sustainability for the long haul, illustrates long-termism.

Key Influences:

• Shareholder Expectations: Investors and shareholders often influence the timescale on which a business operates. If shareholders are focused on quick returns, they might pressure the company to adopt a short-term approach.
• Market Conditions: The industry’s maturity and competition may dictate a business’s timescale. For example, businesses in fast-moving sectors like tech may need to be more agile, while those in mature industries may focus on long-term stability.
• Leadership and Corporate Culture: The values of the leadership team, along with the company’s culture, will also shape whether the organisation favours short-term or long-term thinking.

Evidence-Based versus Subjective Decision Making

When it comes to decision-making, businesses can adopt two primary approaches: evidence-based decision-making and subjective decision-making. Both methods involve gathering and interpreting information to make choices, but they differ in how the information is used and the factors that influence the decision.

• Evidence-Based Decision Making relies on data, facts, and analysis to guide decisions. This method involves collecting relevant data from a variety of sources, such as market research, financial reports, customer feedback, and industry trends, and using that data to make informed choices. Evidence-based decisions are typically more objective, as they are grounded in measurable facts rather than intuition or personal opinions.
• Subjective Decision Making involves relying on personal judgement, intuition, or experience rather than strictly on empirical evidence. This approach is often influenced by the decision-maker's values, beliefs, or past experiences, and it may include elements of gut feeling or personal biases. While subjective decision-making can be important when data is incomplete or unavailable, it can lead to decisions that are less grounded in reality and more prone to bias.

Example: A company deciding whether to expand into a new market may analyse market growth data, competitor performance, customer demand, and economic indicators to make a well-informed decision.

Example: A CEO might choose to enter a new market based on their personal belief in the potential of the region, despite limited market research.

Key Influences:

• Data Availability: In industries with abundant data (e.g., finance or retail), evidence-based decision-making is more common, as it is easier to quantify and analyse data. In contrast, in industries where data is scarce or difficult to interpret (e.g., creative industries), subjective decision-making may play a larger role.
• Organisational Culture: Companies that prioritise analytical thinking, research, and innovation are more likely to favour evidence-based decision-making, whereas companies that value intuition, creativity, or leadership experience may lean towards subjective decisions.
• Risk Appetite: Evidence-based decision-making can help mitigate risk, as it relies on data to predict outcomes, whereas subjective decisions can be riskier due to their reliance on less objective factors.

Summary

Both corporate timescales and decision-making approaches significantly influence business strategy. Short-termism may deliver quick profits but can undermine long-term stability and growth. Conversely, long-termism allows businesses to invest in sustainable strategies but may come at the cost of immediate profitability. Similarly, evidence-based decision-making promotes objectivity and risk mitigation, while subjective decision-making values experience and intuition, though it can introduce bias and risk. Businesses must strike a balance between these elements to navigate the complexities of the market and secure long-term success.