The field of economics is often criticized for failing to have relevance to business realities. One important concept I recall was the difference between “short run” and “long run.” Businesses act different over the short run than they do over the long run.
This concept, however, has little to do with today’s business world. The concept of long run has little application to today’s economy. Instead, everyone is focused on short-term, i.e. immediate gains. The future has been replaced by an obsession with quarters instead of annual or long run considerations.
It is hard to explain why the focus of business is on such a short time focus. It is too easy to blame everything on the Internet, rapid information dissemination or the globalization of the economy. All that type of thinking leads to is another Thomas Friedman book that reports on what already is obvious.
The shortening of business focus has significant implications for compliance. Compliance has no immediate returns. Compliance is a “long-term” investment. For that reason, compliance is often ignored or given a lower priority than other investments that have a more immediate impact on the business.
Short term thinking leads to short-term results. Business leaders focus on quarters, financial performance for each quarter and hitting financial targets. Along the way they are dodging risks and other threats to the business’ reputation.
As time goes on, and with a sense of optimism, I believe the pendulum may swing back the other way – business leaders will soon embrace a little bit more of the long run perspective. This trend will reflect public concern and desire for a greater “sustainability.” People long for stability in their lives and this same desire will be reflected in business operations. Compliance is an important factor in stability and “sustainability.”
Forward thinking business leaders will embrace compliance as an important part of a company’s stability. Some already have embraced the concept, recognizing that value and integrity are important aspects of a company’s positive reputation. More will do so in the future.
Compliance can have an immediate and important impact on the business. Building a compliance program can take years before it has firmly taken root.
Some companies have started the compliance process from a point where compliance was largely ignored. It is not easy to change the company focus on longer-term goals and projects.
Often, however, the first steps in designing and implementing a compliance program have a positive impact – senior managers and employees become aware of a company perspective beyond the short-term. It gives senior managers and employees a positive feeling that the company is in it for the long haul and not just for as long as quarterly reporting results are positive.