When Hewlett-Packard board director Maggie Wilderotter wrote a letter to management recommending a fresh look, a radical change in strategy is what she had mind. With the support of CEO Meg Whitman, the board helped push the executive team outside its comfort zone to reorganize—and drop some of its divisions that were no longer creating value and instead focus on newer areas, like data-center services. The result of this new direction was a smaller, more tech-focused company with $35 billion in annual sales. Long-term decisions like this are the subject of a new book, Go Long, that hit shelves this past month. It’s coauthored by Rodney Zemmel, managing partner of McKinsey’s New York, Boston, and Stamford offices.
For more than a decade McKinsey has been publishing on the benefits of taking a long- term view, most often from an investor perspective. Go Long uniquely takes more of a managerial perspective, profiling six leading businesses that ignored short-term pressures and reaped significant benefits as a result.
The book’s authors gathered last week in New York for an evening panel to discuss and celebrate the launch of the book. Moderated by Michael Stewart, global vice chairman at Edelman and McKinsey alumnus, the panel was joined by Bill McNabb, chairman of the board of Vanguard. The discussion began with a two-pronged question: “Why this book?” and “why now?”
“My coauthors and I are organizers of an annual gathering of US business leaders called CEO Academy,” says Rodney. “In recent years we’ve heard growing interest from attendees on the topic of managing for the long term.” A closer look at research coming out of McKinsey Global Institute and Focusing Capital on the Long Term (FCLT) shows that some of the short-term thinking happening across companies is actually self-imposed—with CEOs getting in their own way.
“In order to make a point, you need to have stories,” says Rodney. “That’s why we spoke to CEOs to record what this type of thinking and behavior actually looks like rather than just offer theories and research.” Go Long documents some of the world’s most prominent business leaders, chronicling their experiences and the hard decisions they’ve had to make to take a long-term approach. For example, the book takes readers through CVS CEO Larry Merlo’s decision to pull tobacco off its shelves and take a $2 billion hit in order to turn the company into the healthcare giant it is today.
In order to make a point, you need to have stories.
Throughout his 20-plus-year career at McKinsey, Rodney has been interested in understanding what makes a successful CEO, and, as discussed in Go Long, he’s found that taking a long-term view is one important factor. With a PhD in molecular biology, he has been focused in part on helping leaders at pharmaceuticals and healthcare and healthcare-adjacent institutions with their long-term growth strategies.
When writing Go Long “we wanted to show the importance of striking a balance between short- and long-term thinking,” Rodney says. “After all—long-termism is made up of a lot of short-term periods.”
During the panel discussion, Bill shared how Vanguard has applied much of this kind of thinking into its own corporate strategy by putting metrics in place around a ten-year horizon. “We look at factors like employee engagement, fund performance for investors, client loyalty, and operating expenses,” he said. “We know you can’t just wait until year eight, though, to get started on all this.”
Rodney reaffirmed the effectiveness of this type of strategy, sharing a few common actions that contributed to the successes of companies referenced in the book. “First is the importance of communicating your long-term vision; second is having metrics in place on both long-term strategy and traditional performance; and third is ensuring that boards spend sufficient time on long-term strategy and set up the discussion in the right way.” All panelists agreed that to ultimately see real behavior change within companies, the right incentives—which could be in the form of tying long-term decisions to compensation— need to be in place.
To learn more, you can order the book here.