Indicators of Misalignment Between Long-Term and Short-Term Strategy

OBJECTIVE OF THIS RESOURCE: Reviewing these warning signs can help management identify potential misalignments between long- and short-term strategy.

From the directors’ perspective, the degree of alignment between ongoing operations and long-term objectives may not always be easy to see. The following symptoms or warning signs may indicate that the board needs to pay closer attention:

• Reports and presentations to the board tend to focus heavily on historical issues and metrics, or on topics that have a short-term time frame.
• Boardroom discussions about business and market trends, emerging risks and opportunities, and other future-oriented topics occur infrequently or only in response to a specific request or event.
• C-suite and key executive compensation is primarily in the form of cash salary and bonuses as opposed to long-term equity plans.
• Incentive plans (including annual bonus plans) at most levels of management are tied strongly to short-term goals and metrics, with few or no long-term objectives included.
• Nonfinancial performance measures that contribute to long-term growth (e.g., product quality, customer satisfaction, employee engagement) are given little or no weight in performance assessments.
• The organization experiences a pattern of high CEO and/or C-suite turnover based on failure to perform after relatively short intervals.