“The set of skills that help you succeed early in your career are fundamentally different from those needed in later stages. This is something I’ve seen repeatedly with the thousands of executives I’ve worked with. Those whose thinking and behaviors stay stuck in one stage don’t do nearly as well in more strategic positions as those who move forward,” says Kathy Pearson of her work in Wharton’s Executive Education and MBA programs, including Strategic Thinking and Management for Competitive Advantage, and in consultation with some of the world’s largest and most influential companies.
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The different skill sets Pearson refers to are the ones needed for meeting short- and long-term objectives. Short-term goals, she says, have clear metrics for success. They’re measured by numbers and good predictive models, and have a bias toward action. “When you’re focused on meeting short-term objectives, rewards come to those who can get things done. Typically, this is the focus in the earlier part of your career.”
But using the same kinds of predictions and metrics for meeting long-term objectives, says Pearson, doesn’t work. “There are companies today who are still writing five-year plans that include predictive, forecasted revenue and profit values. They spend their resources making a lot of assumptions about what might happen and build their goals around those assumptions. Then the plan gets put on the shelf until, once a year, it’s taken down and dusted off. This is what you get when you apply short-term behaviors to long-term objectives: a plan with very limited value because it’s based on too many assumptions.”
Pearson refers to a longitudinal study done by Jim Collins and detailed in his new book Great by Choice. Companies that went from “good to great” had a number of things in common, including a superior ability to balance short- and long-term objectives. “These companies,” says Pearson, “are very good at managing short-term goals. They measure and predict and meet their objectives. But they are also very comfortable with uncertainty. In Collins’ language, they don’t fire a cannon long-range when they don’t know where the target is. Instead they use scatter shots to help them determine where the target lies.”
Other than holding off on cannon fire, what are the skills needed to meet long-term objectives? “It’s about planning for uncertainty,” she says. “You need to identify key trends and understand where the uncertainties lie. Instead of predicting, manage the uncertainty. This is dynamic planning, as opposed to the static five-year plan. Your focus is on optionality, continuously updating and course correcting.”
In Strategic Thinking and Management for Competitive Advantage, Pearson discusses these skills in terms of career development. “Once you get to a certain level, you get involved in bigger-picture objectives. You still need to meet those short-term goals, but you’re also planning for the longer term. The problem for many executives is that they fail to recognize that they need a different set of skills at that point. Applying what works for short-term objectives — an action- and analytics-orientation — to long-term ones isn’t going to work.”
Pearson cites a study published in the McKinsey Quarterly that looked at the factors in over a thousand significant decisions (relating to long-term, big-picture issues such as M&A; organizational change; and expansion into new geographies, products, and services) and how they influenced performance. “Only eight percent of the successful outcomes could be attributed to good analytics, while 39 percent were the result of industry or company uncertainties (what I’d call luck) and 53 percent were due to what could be called judgment and sound critical thinking. The study refers to these skills as the ‘inclusion of perspectives that contradict senior leader’s point of view, allowing participation in discussion by skill and experience rather than by rank.’”
Pearson tells executives that her work, and that of Collins and the McKinsey study, show the value of a robust decision process when dealing with long-term objectives. “McKinsey shows us that good process beats good analytics by a factor of six,” she notes. “You might be asked to develop an analytical business case for a long-term objective, but the reality is that it’s not going to be as useful as an approach that identifies and manages for uncertainties. Unfortunately, though, when you’ve been rewarded for years, or even decades, for analysis and action, you’re going to want to apply it to everything. What I see is that, for long-term objectives, you need to recognize that another approach works better.”
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