Getting management teams to look beyond the horizon is sometimes a challenge since everyday business is so engulfing.
Despite the above challenges, long-termism has been proven to produce considerably better results than short-termism. Using a data set covering 615 large- and mid-cap publicly listed US companies from 2001 to 2015, McKinsey has shown it black on white. Their data looks at patterns of investment, growth, earnings quality and earnings management. It separates companies with a long-term focus from others and compares their performance.
Among the findings:
- From 2001-14, the revenue of long-term firms cumulatively grew 47 per cent more, on average, than the revenue of other firms, with less volatility.
- Long-term firms invested more than other firms from 2001 to 2014.
- Long-term companies exhibited stronger financial performance over time
- From 2001-15, long-term firms added nearly 12,000 more jobs, on average, than other firms.
The research shows that firms with a long-term focus exhibit stronger fundamentals, deliver stronger superior financial performance, continue to invest in difficult times and add more to economic output and growth.