Why are so many corporations living from “quarter to quarter?” Executive leaders set targets, track KPIs, and then close out sales and revenue-generating items according to expectations for the next quarter. While this practice has grown common among modern organizations, it has brought mixed results. Corporate boards should understand the advantages and disadvantages of operating from quarter to quarter.
The Advantages of Living From Quarter to Quarter
On the positive side, living from quarter to quarter affords companies certain financial opportunities and advantages, including the following.
One of the biggest advantages of living from quarter to quarter is that company leaders will have a greater opportunity to react and respond to evolving economic conditions. By setting goals specific to each quarter, executive leaders will be able to set short-term goals and make timely evaluations based on immediate results.
As a result, companies will gain the advantage of a rapid decision-making process. If your current business activities aren’t yielding the results you anticipated, you’ll have the opportunity to respond and react quickly to correct any deficiencies in the coming quarter(s). By operating from quarter to quarter, companies are better able to stay on track toward their goals.
Setting quarterly goals will also provide leadership teams with greater visibility into company progress. This applies to the corporate board overseeing the entire company’s operations as well as mid-level managers who oversee specialized departments within the entity as a whole.
This also gives leadership a chance to track immediate, short-term goals to stay on track with the company’s larger mission. Meanwhile, leadership teams will have a more direct view of how the progress of individual departments is contributing to both quarterly and long-term goals. And by instituting quarterly goals across departments, companies can achieve greater consistency among all their team members.
Compliance and Risk
As a general rule, quarterly goals more closely align with reporting guidelines for publicly traded companies. By living from quarter to quarter, corporate boards can better ensure that they satisfy legal and industry requirements pertaining to reporting.
To that same end, quarterly goals will quickly highlight areas of risk. Companies can pinpoint small issues before they develop into big ones, ensuring that companies remain compliant with an evolving set of legal and regulatory issues.
Short-term goals can keep employees motivated and engaged. That’s because it’s easier to keep goals in sight when they are more immediately in front of you. By setting clear, quarterly goals, managers and company leaders can help their workers remain engaged and can see how the work of each department intersects with the company’s larger mission.
Employees prefer to work for companies where they feel they are making a difference. Instilling a sense of purpose will help you attract and retain your best employees, who will see that they are making a meaningful contribution to your larger vision.
The Dangers of Living From Quarter to Quarter
While quarterly goals can offer an advantage to corporate leadership boards, there are some very clear dangers to this quarter-to-quarter approach. Here are the pitfalls of living only by quarterly goals.
Losing Sight of the Bigger Picture
Sure, setting quarterly goals will help you hit your most immediate targets. But the danger is that you might lose sight of your “big picture.” Your company’s long-term vision can be lost in the endless pursuit of your latest quarterly goal.
To combat this, corporate leaders should look for ways to align their short-term, quarterly goals with the company’s larger purpose and strategy. Doing so will also empower employees to understand how their own KPIs fit within the company’s mission and vision.
The Danger of “What’s Next?”
In an age of 24-hour cable news, it’s easy to lose sight of the larger picture, focusing instead on “what’s next.” As a result, analysts and investors might be tempted to focus on the immediate performance of a company rather than adopt a broader perspective on the market or industry.
Executive teams can unfortunately buy into this way of thinking, elevating immediate goals over long-term results. That’s another reason why it’s important for companies to celebrate their victories so that short-term challenges don’t come to define the nature of a company.
Every workplace culture should achieve an optimal balance between novelty and consistency. With the constant setting (and replacing) of quarterly goals, it’s easy for leaders and employees to experience burnout, since they’re always aiming at a new quarterly goal.
Instead, leaders should focus on creating an ecosystem where each goal is a progression toward a larger purpose. That is, each quarterly goal becomes a stepping stone toward your company’s larger mission, and employees can see variation within these goals without losing focus on the company’s ultimate purpose.
“Creative destruction” refers to the tendency for capitalism to lay waste to legacy systems in pursuit of the next big thing. To a certain degree, every company should be striving for innovation and flexibility. However, responding only to market forces could result in jettisoning established systems whose value will endure after a brief period of economic turbulence.
That’s why it’s important for boards to map out the company’s non-negotiable core values. Establishing these values will dictate the direction of the company and retain focus regardless of what’s happening in the market.
This way, while companies may modify their strategy in the short term, they will not abandon the values that form the core of their corporate identity and mission.
The Balancing Act of Corporate Leadership
The pros and cons of living from quarter to quarter should prompt corporate leaders to recognize the value of setting both short- and long-term goals.
To neglect a long-term strategy is to surrender one’s company to the rise and fall of the American economy. But to neglect your short-term goals is to fail to respond to periods of pressure and crisis. Only by doing both can you create a meaningful, long-term vision and devise a strategy by which you’ll meet that vision.