Short-termism threatening business survival

Short-termism is threatening companies’ long-term survival in the marketplace, and 15 per cent of chief executives and board members surveyed by the Australian Institute of Management (AIM) fear their organisation will not exist in five years time.

Some 44 per cent of the 1,200 executives who responded to the Corporate Endurance survey believe attaining short-term profit goals was impacting on their organisation’s approach to business, while 51 per cent of respondents working with public companies said it was affecting performance.

“The global financial crisis is the time when companies should show they’ve learnt from the mistakes of the past, shun short-termism and focus on building long-term competitive advantage,” said AIM Victoria and Tasmania chief executive Susan Heron.

Heron said AIM is concerned by the high failure rate of corporations in Australia, noting that the Australian Bureau of Statistics showed that between 2003 and 2007, the survival rate of businesses across all industry divisions was 58 per cent.

“Companies should ensure they have the business basics right — strategy, cash flow, debt management and investing in their people — to build and retain the critical skill sets necessary for long-term growth.”

Respondents to the survey identified the ability to adapt to change, leadership and management and business strategy, processes and financial plans as the critical factors that ensure long-term survival.