Sometimes short-term costs stop us from making the changes we need to be successful in the long-run. But they shouldn’t.
Digging in the Sand for Long-Term Success
I have fond memories of spending summer days building sandcastles on the beaches of Cape Cod. Aside from building towering sandcastles, I’d dig holes in the sand as a deep as possible.
The problem with digging holes in the sand is that it’s nearly impossible to dig straight down. Instead, you need to dig at an angle. This produces a hole that looks something likes this.
The problem with this hole is that it’s simply impossible to dig much deeper. As a young boy, my options were to either be content with the depth of the hole or widen the hole to make it deeper. The problem with the latter option was that, by widening the hole at the top, I would cave in much of the hole. This erased the progress I had already made. I had to deal with the short-term cost of a shallower hole in order to make a deeper hole in the long-run.
The Short-Term Costs of Organizational Change
When an organization decides to change the way it works, it almost always takes time to adjust to those changes. During that adjustment period, productivity declines. For most organizations, greater productivity is one of the goals of successful organizational change. If that change is successful, the organizational experiences greater long-term productivity. The Satir change model (below) describes this process.
Transportation Infrastructure Improvements: The Ultimate Case of Short-Term Costs
Of course, there is a financial cost associated with improving existing transportation infrastructure. But there’s also the cost of reduced capacity while improvements are implemented. This is the politician’s dilemma. Constituents complain when roads have potholes in them. However, constituents also complain when there’s traffic congestion as a result of crews fixing those same potholes. How can the politician win?
Methods for Coping with Short-Term Costs
The common theme throughout these three disparate cases is that the long-term benefits greatly exceed the short-term costs. Further, the period for which benefits are enjoyed greatly exceeds the period of time the costs are incurred. Assuming a long time horizon, it’s rational for the individual or organization to assume those costs.
The problem occurs when the time horizon is short. Short-term costs can demoralize employees adjusting to new work processes. Poor morale may lead some employees to leave the company, increasing short-term costs further. Short-term costs can turn constituents against a politician, causing her to lose re-election. (The even more unfortunate consequence for the politician is that her successor may be able to claim the credit for the long-term benefits her actions created). For the young boy on the beach, parents who decide it is time to head home cause him to abandon his widened but caved-in hole before he could complete his second round of digging.
To cope with short-term costs that lead to long-term success, two principles are key;
- Communicate with stakeholders that the long-term benefit exceeds the short-term cost. This communication must not only take place before the cost is incurred but also the period during which the cost is incurred. Getting buy-in while times are good is easy. Maintaining buy-in when the going gets tough may not be.
- Lengthen the planning time horizon. Short-term planning avoids short-term costs. However, short-term planning also fails to account for long-term benefits. The term-constrained politician may find this difficult, but one who can effectively “go public” may be able to lengthen the time horizon her constituents consider on election day.