I've come to the realization that all of our existing management mantras are all wrong, but not for the reasons you might suspect.  Yes, it is important to optimize processes, to innovate, to drive shareholder value and to do all of the other things that are often called out in a mission statement, and then quickly disposed of.  If we are honest with ourselves, any publicly traded firm will admit that there is only one driver of results - the quarterly numbers.  Meeting and or exceeding those numbers, at whatever cost or whatever effort - is really the only thing that matters in publicly traded firms, to the extent that they will do things that on the surface seem rather odd.

For instance, my firm was approached by a software firm and asked to become a consulting partner.  While the software firm needed to demonstrate revenue growth, only a certain percentage of the revenue could come from consulting services, so some of that revenue had to be delivered by a third party firm.  If too much of the software firm's revenue came from consulting, then the market would revalue the firm as a services firm, not a software firm, and the multiples are much nicer for a software firm.  Or, in many cases I've pressed sales people to bring in deals early.  In the software and hardware world, every customer knows the pressure that exists on the sales team to bring in good results each quarter, so there's really very little incentive for a firm to purchase software or hardware except near the end of the quarter, when they have leverage over the sales person or vendor who is trying to make their numbers. 

This quarterly driven thinking means that each opportunity, each deal takes on greater value than it has in retrospect, and distracts attention from a host of important other issues.  It has in the past encouraged a wide array of rather dubious sales tactics, including channel stuffing, and has created a generation of managers who can't contemplate a time horizon greater than 90 days.  This framework also increases the risk profile of doing anything differently than your competitors.  Even if a product or service may pay off in two or three quarters, it usually safer to simply mimic or copy a competitors product rather than create something very new. 

Lee Iacocca has written a book entitled "Where have all the leaders gone?" and I want to ask the same question.  Where are the people who are willing to break with this 90 day treadmill and create long-term vision and growth for their companies, rather than constantly short-changing the future for a result every 90 days.  Where is it written that a quarter of a year has anything to do with how a business should be managed?  Most business cycles last for years, and even a recession or a downturn usually lasts longer than 90 days.  There are few product lifecycles that can happen within 90 days, and in most businesses a 30 to 45 day period exists between an order and payment for that order, so even an order to payment cycle may last longer than 90 days.

I'm not arguing that we don't need milestones and metrics to help us understand the value and results demonstrated by an executive team, but the focus on such short term timeframes and the constant drumbeat of achieving those timeframes is severely limiting the vision, strategy and scope of most publicly traded firms.  We need leaders who can look beyond the quarterly milestone and demonstrate to shareholders the value they can provide in the long run.  If you believe Warren Buffett and other investors like him, quarterly results don't matter - long term strategy and good business practices do.  Where are the leaders who can respond to that thinking and demonstrate to the Street and to their employees that they intend to manage differently?