The Tyranny of the Quarter

http://www.ifb.org.uk/ There are some interesting comments made by John Kay (pictured), one of the UK’s leading economists, in the interim report on the Government’s review of UK Equity Markets and Long-Term Decision-Making.

Nailing his colours to the mast Kay commented in the FT on “the tyranny of quarterly earnings” encouraging investors to treat such reporting with caution and drawing parallels with junk mail.

So what’s the relevance of this debate to family firms? Last year the IFB published its white paper Family Business Stewardship that explored some of the drivers for success in a family business. We found that the best family firms are not only focused on the long-term – usually armed with a clear sense of purpose – but they also vigorously manage the short-term.

Family firms are generally no different than their non-family peers when it comes to managing the business, however where the family business can gain an advantage is by avoiding being a slave to excessive management reporting. Businesses increasingly recognise that there is a cost to reporting- transparency is good- but a surfeit of data is often unproductive.

Owners and their boards can judge performance in the short, medium and long-term supported by the right amount of information - neither too much nor too little, and measure success over the timescale of any particular investment project. Family business owners may also ask ‘where will our business be in 20 years time’ with a reasonable certainty that they will be there two decades later to take responsibility for their forecasts.