Building long-term corporate goals

The current issue of The McKinsey Quarterly has a good article on building long-term corporate goals. Most companies focus on short-term results such as quarterly earnings at the expense of long-term corporate health but I was really surprised to hear the results of a recent study of 401 financial executives and their planning goals.

A majority of the managers polled said that they would forgo an investment offering a decent return on capital if it meant missing their quarterly earnings expectations. Indeed, more than 80 percent of the executives responding said they would cut expenditures on R&D and marketing to ensure that they met their quarterly earnings targets — even if they believed that the cuts were destroying long-term value.

I like these types of articles because they present theory and back it up with observations from client work.