This blog post is part of the HBR Online Forum The CEO’s Role in Fixing the System.To achieve sustained growth and profit in today’s hyper-competitive global markets, leadership must have a deep commitment to and knowledge of those who truly invest in the firm — employees, vendors, customers, the community, and owners in for the long term. My view is that an emphasis on short term (i.e., quarterly) earnings has many damaging effects on a company’s ability to pursue an innovative or entrepreneurial corporate strategy.
Perhaps the most pernicious effect of an emphasis on short-term earnings is its destructive impact on the succession process. My research shows that the most successful CEOs are inside outsiders, executives who have grown up in the company and know how it works but have developed an outsider’s perspective and have a vision of what needs to change in order to take advantage of the transformed markets. It takes time and attention to develop this kind of talent: recruiting, training, mentoring, coaching, and thoughtful sequencing of assignments. Every business development, planning process, and strategic initiative represents an opportunity to help executives grow. In other words, how the company is managed is the way you manage succession.
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