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Short Term Thinking

Short Termism:

One of my big bug bears at the moment is the philosophy many companies seem to be adopting, I don't understand it, because it seems illogical and I think the impact on all our lives will ultimately be really bad.

I can best explain short termism and its implications with one quick example.

This summer in the UK a big company ( I don't think I should mention their name) decided to save money, and cut costs to boost profits for their shareholders. I feel I should mention I do not have a problem with any company making money. This company decided to out source one of its operations. I guess their logic being that they no longer had a responsibility for the pensions and other associated costs with having an internal supplier of food. They used their levergae and buying power to them keep the costs of that service to an absolute minimum, without in my opinion any regard for the implications to themselves, the quality of the service, the other company and most importantly to me on a human level the staff working for that third company.

That third party company passed on that cost pressure to its staff. Ultimately industrial relations with its own staff inevitably broke down, industrial strike action was their only option. The original parent companies staff, after seeing their old colleges treat so badly also came out in strike causing massive disruption. The company lost approximately 40 million pounds during the strike, long term the effect on the brand might be huge. The company previous to the strike was actually making record profits, so why go down the route of cutting costs, when you have the option to invest in making your product or service superior to your competitors?

Interestingly some analysts I have seen report on the above company and issue actually attempt to blame the law here in the UK which protects workers pay terms and conditions when companies outsource them. Stating that rather than the parent company attempting to pay a fair price for a fair services, that having to pay the staff "overly generous" conditions was the route cause of the problem. In my experience people with overly generous pay and conditions rarely go on strike!

This Short Termism pervades many areas of our lives, lack of corporate responsibility, banks and credit companies lending money without really checking people can afford to borrow those amounts for example. The government for allowing companies to behave in such a manner. How can an ever increasing percentage of the population struggling with larger be good for the larger economy and ultimately society.