Short-Term vs. Long-Term Thinking—What’s the Right Balance?
Last week, I caught up with David Thornhill, CFO/COO of New York-based AKF, a 400-person mechanical/electrical engineering firm with 11 offices in the U.S. and two in Mexico. David regularly couples financial expertise with strategic thinking, so I thought it would be interesting to get his perspective on balancing near-term issues with longer-term matters. Here’s how it went:
David, thanks for contributing to Word on the Street!
Thanks for the opportunity.
Why is it important for AE firm leaders to distinguish between short- and long-term focus?
It’s important because over time, you expect your focus to go where it needs to go, whether it’s to something immediate or down the road. But if you aren’t conscious of balancing the two, you ultimately won’t get to where you want to go in the long term. You need to carve out that time in your calendar to figure out where you’re headed, how you’ll get there, how you’ll know you’re getting there, and how you’ll adjust when you need to make a course correction.
What makes a short-term item short term, and what makes a long-term item long term?
Unfortunately, I’m not sure you can always tell in the moment, but I consider short-term items to have specific deadlines, like Section 174. To me, it’s a short-term issue because there are dates— tax filing dates, congressional dates, and so on. Some might say that’s an intermediate concern, but ideally you are not talking about it five years from now. On the other hand, you will be talking about succession five years from now.
What long-term issues have your attention?
Succession, broadly defined, including employee training and development, as well as ownership transition—making sure we serve our clients today and are prepared to help them tomorrow. The second long-term item is maintaining and strengthening the relationship with our Mexico offices—the differences in culture and time zones can make that challenging. And a third is our strategic plan—simplifying it enough so employees know how to prioritize their time in ways that align with the direction of the firm.
What’s the right balance?
Where you stand depends on where you sit. If you are the COO, it’s more short to intermediate actions with the understanding of where you’re trying to go. If you’re the CEO, it’s about achieving the firm’s vision and communicating that vision relentlessly. I once worked with an executive who summed up his priorities this way—put food on the table for other people, put the right people in the right job, let them do it and hold them accountable, and set the direction and tone. All of his time was dedicated to those specific things. I personally focus about 60-70% of my time on short-term issues and the rest on how I can help the company focus where we need to focus, whether that’s our organizational or capital structure, geographic concentration, our various sectors, or even sales. But as you have often reminded me, I am an unusual CFO. I started from the engineering/project side, so I’m not the debit and credit guy—but when I see the balance sheet, I know the story it tells and the strengths and weaknesses it reveals.
How do you balance the short term and the long term when everything is changing at such a rapid pace?
You need to be flexible enough to know when situations are changing so you can either change yourself to fit the plan or shift the plan to fit reality. For example, COVID impacted the commercial market. Some architects in that space are beginning to lay people off. So, what does that mean to us? Our people have to be cross-trained to do work in health care and science and tech. In any case, we can’t just sit still when the rules of the game change. We have to adapt.
I’ve seen how easy it is for well-intentioned leadership teams to get distracted when they blend short-term and long-term issues. What do you do at AKF to avoid going in any and all directions?
First, we separate out operational matters from our strategic meetings so things don’t go off the rails. Second, we invite our outside members to some meetings but not others, which helps to maintain their interest and objectivity. Third, we look to accomplish specific things, like deciding who we’ll train and develop and who will be offered ownership and when. We also assign read-aheads and create clear agendas so we’re not going into meetings asking what we’re doing or why we’re there.
How do you know if you’re focusing too much time on short-term issues? What do you observe when that happens?
Too many conflicts with where the firm should go and what it should do, and subtle signals that indicate a lack of alignment with the firm’s vision. If you’re getting a lot of questions about the firm’s direction that you can’t answer, you don’t have enough time going in the long-term bucket.
What about when too much time is dedicated to the long term?
That will show up in liquidity. Take Long-Term Capital Management (LTCM), for example. It was a large hedge fund led by some of the most accomplished people in the world, including Nobel Prize-winning economists and renowned Wall Street traders. They had a brilliant strategy but some fatal short-term issues that eventually caused them to crater. It was like going to the blackjack table not knowing that if you lose all your money, you don’t get to bet anymore. You may have a good strategy, but if you ignore the short term, you’re out of the game before you know it.
What are some other considerations when trying to balance the short term and long term?
It’s not just about you. It’s about your people’s development. To me, that always takes precedence. Even when you are looking at the long term, if someone needs you in the short term, you have to give them that time. I’m talking more in terms of mentoring, training, and investing in people.
Should you invest your time or spend your time? What’s the difference?
Invest time, don’t spend it. For example, you can spend time in a meeting only to find three hours later that nothing got done. On the other hand, you could invest your time to help someone decide what to do and how to best do it to achieve mutually advantageous objectives. There’s only so much time to go around, so be selective in how you invest it because when everything is important, nothing is.
For help with balancing your short-term and long-term priorities, call Mark Goodale at 508.254.3914 or send an email to [email protected].