The message to Wall Street is growing louder that at least some big firms will be trying to focus on long-term goals instead of short-term quarterly gains. But the question remains: Will investors listen?
In a key move, Apple recently announced it would stop reporting individual sales each quarter for the iPhone, iPad, and Mac, citing that such reports were “not representative of underlying state of business." According to Jamen Graves, a senior client partner at Korn Ferry who specializes in tech, the move is an attempt to align employees, customers, investors, and other stakeholders around the idea that Apple’s future success is about more than any one product.
“It sets up a culture that is conducive to what Apple needs to become,” says Graves. “The reporting change is likely just the beginning, and it signals a pivotal shift in what it means to work at Apple for employees, and how we should think about Apple as investors, shareholders, and customers.”
It also follows a pattern of other business leaders who are arguing for universal steps to foster what they believe is the long-term thinking needed in today’s fast-changing business landscape. JPMorgan’s Jamie Dimon and investor Warren Buffett are advocating eliminating quarterly earning guidance. Pepsi Chairman Indra Nooyi successfully lobbied the White House to get the US Securities and Exchange Commission to undertake a study on moving to a six-month reporting schedule. And Tesla CEO Elon Musk is considering taking the company private to remove the focus on short-term projections.
“A longer-term view is better for organizations as a whole,” says Michele Pollack, a senior client partner at Korn Ferry who specializes in financial services. “But from the investor point of view, they expect this kind of information. So there’s this disconnect between companies wanting to focus attention away from short-term forecasts and investors who have been accustomed to expect this information quarterly.”
Put another way, investors want to know what is happening now. According to Kevin Cashman, global leader of CEO and executive development at Korn Ferry, the addiction to quarterly results unintentionally “rewards leaders who are lacking in vision, courage, and character.”
“Real leadership agility involves reconciling the financial realities of the present with the value creation needs of the future,” says Cashman.