Short-termism a risk to people planning

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Businesses that prioritise short-termism over investment in staff risk their future performance, according to research by Korn Ferry

Its report found that 67% of business leaders felt pressured to put short-term investor gains above people-planning activities.

Most business leaders (84%) said they would need a higher proportion of skilled workers in their organisations in future, with 64% intending to increase their workforce by 20% before 2025. However, only 9% had a formal plan in place to achieve this.

Korn Ferry predicted that the global economy will be short an estimated 82.5 million skilled workers by 2030.

Norman Pickavance, chief executive of Tomorrow’s Company, told HR magazine that such short-termism is part of an anti-investment culture that has permeated UK corporate boardrooms, affecting technology, innovation and people. “There’s a risk-aversion in board behaviour. This lack of investment is worse in the UK than in any other major OECD country,” said Pickavance.

“It manifests itself in low productivity, a lack of skills and low levels of engagement as well as the crisis of mental health that we are currently seeing at work. To deliver long-term sustainable results boardrooms need to focus firstly on people and secondly on customers. And then they’ll be able to deliver results.”

Steven Young, professor of accounting at Lancaster University Management School, told HR magazine that a failure to invest in talent could have huge long-term costs to businesses and their shareholders, particularly in an AI economy.

“The risk is not so much that people will no longer be required, but rather that they will be required to undertake the more complex value-added tasks that can’t be automated,” he said. “As a result the average skill level of the workforce is likely to rise. While some skills can be acquired externally [through education] a lot are likely to be organisation- and task-specific, which requires company-level investment in training.”

In order to deliver the results that investors expect, management will need the buy-in of shareholders to a more long-term business strategy, he added.

“If management chooses to emphasise short-term performance measures such as earnings... then short-termism is the natural result,” said Young. “The trick for management is to adopt a value-based narrative around performance and then to 'educate' investors about the key drivers of long-term value such as investment in human capital.”

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