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This chapter is from the book

Emphasis On the Short, Short Run in Companies

Going up the management hierarchy always meant having a longer time horizon. Economists took for granted that top management would seek to grow the business and to build robust organizations with solid reputations that could weather the inevitable vicissitudes of the real world and gradually grow their earnings and dividends. By definition, top management took a long run view of strategic decision making.

Management strategy and decision making has been transformed in many companies. Very short-run thinking replaced those longer time horizons and tough tradeoffs among goals and "stakeholders." What counts is this quarter’s earnings or revenues and how they will compare with this period’s earnings’ "guidance" previously provided to "The Street." It was only the short-run "bottom line" that was pursued with a vengeance.

CEOs themselves also became short run. This has major consequences for the executive’s time horizon. A half-dozen years in the job is becoming typical in contrast to the traditional assumption of service through retirement. Careerist job-hopping is one reason, but also there are the terminations following anemic share price growth.

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