The Costs of Short-Term Thinking.

As a general rule, employees don’t form unions if they are thrilled with management, pay, working conditions and their jobs. Especially in the United States, forming a union is not a recreational activity. It’s difficult and could cost workers their jobs.

Amazon and Starbucks both face fast-spreading unionization efforts.

In addition to worker complaints and demands, Starbucks has a long list of challenges to overcome. Howard Schultz is back at the helm as CEO. He quickly suspended stock buybacks and criticized former management for “false promises” both to employees and customers. Schultz said Starbucks would instead spend the savings on stores and staff. He also dismissed the former General Counsel for the firm in an attempt to reset the stage for the unionization and diversity concerns.

In a 7-minute video to employees released on Friday, Schultz said, “We’re going to make promises that we can keep, we’re going to make promises that are real.”

He laid out a plan to reverse many of the short-term decisions that have had an adverse long-term effect on the company and instead, Schultz said, “We’re going to make much better long-term decisions that are going to have a short-term benefit for you.”

From better training, wages and guaranteed hours, Schultz promised to fix basic challenges like maintenance people not showing up on time to fix broken espresso and ice machines. 

We have no guarantee Schultz will turn the company around, but I haven’t sold any shares and I’m a longtime very happy shareholder. The pandemic has been very disruptive to the retail and service sectors. Starbucks is not immune to this disruption. They are big and successful but not isolated from wage pressure and inflation. His approach, in the short-term, is spot on. 

I read an interesting article about Barnes and Noble in the Washington Post or New York Times. I can’t remember which newspaper, but the history of the quick entry and exit of four CEOs in the last five years was fascinating. Each unsuccessful leader had a plan that was very short-term. One said in a company memo he “saw the end of physical books entirely,” and wanted to replace nearly all employees in the stores with Nook checkout kiosks. 

Fast forward to today and Barnes and Noble is thriving. Last year, physical books generated 76% of publisher’s revenue (source Association of American Publishers). The currently-successful CEO at B&N gave control back to the local store managers. He empowers them to place orders based on what sells in their local markets. This is a great long-term strategy: give control to the people who have boots on the ground.

Many times, I’ve been guilty of deploying short-term thinking:

From hours of operation, staffing levels, locations and marketing plans, it’s easy to set a budget and stick to it. It’s difficult to measure a poor result or notice a challenging trend and to reverse course. It was hard for me to say I was wrong. This ego-driven weakness had a peculiar way of rearing its ugly head at precisely the wrong moments.

When I needed to focus on long-term sustainability and protect margin in a new location, for example, I was tempted to slash fees and offer steep discounts or too-aggressive financing.

When I should have doubled-down on employee and manager training and systems, I was tempted to move fast and break glass by hiring the next warm body and throwing them into a complex, growing organization.

The times I most needed to think about the big picture, I was tempted to listen to the chatter in my head about what was important and urgent. This kept me racing from fire to fire.

Like Shultz at Starbucks, James Daunt at Barnes and Noble or Bob Chapek at Disney, we should all zoom out and carefully assess the promises we’ve made to the market, to our employees, investors and stakeholders.

We would all do well to ask what are the costs of our short-term thinking, or as Charlie Munger says, “Figure out where you will die and never go there.”