At this time last year, I wrote a column that discussed Major League Baseball’s “trade deadline” and how it provides some good lessons that we can apply to business decision-making. In today’s column, I will revisit one of those lessons in more detail than I provided last time. However, before we delve into that lesson, please allow me to quickly review the trade deadline and its implications.
This year’s trade deadline was last Tuesday, July 30, at 6 pm EDT, meaning that teams cannot make trades for players from other teams after that time. As the deadline approached, teams had to determine their chances of making the Major League Baseball (MLB) post-season, which comes with the opportunity to earn additional revenues and potentially win a World Series championship. If they feel like they have a chance to reach the post-season, they explore taking this final opportunity to acquire talent to improve their team as they chase a championship. These teams are known as “buyers.” The other teams, who have much less chance to make the post-season, attempt to trade talent they only have under contract in the short run for assets they believe will help them have success in future seasons. These teams are known as “sellers.”
The decision to be a buyer or seller is fairly easy for some teams. The best teams, who seem almost guaranteed to make the post-season will definitely be buyers; while the worst teams, who have almost no chance of making the post-season will definitely be sellers. However, with the expansion of the playoffs to now include 12 of the 30 MLB teams making the post-season, there are very few teams who consider themselves outright sellers. Therefore, many more teams are potential buyers, and they must often decide if they are willing to potentially sacrifice some of their future success for winning now.
In my column last year, one of the primary linkages I made between MLB’s trade deadline and running your business was that in both cases, the parties involved must evaluate their short-term and long-term goals and outcomes and attempt to balance them. MLB teams need to decide if they are going to trade their younger minor league prospects (long-term assets) for short-term, older talent who might lead them to the playoffs and a potential championship. Teams are warned to make such trades with caution. While the talent they trade for might have the potential to lead the teams to wins that will increase their top and bottom lines this season, trading away their young talent may sacrifice future success. Businesses need to consider similar tradeoffs as they pursue short-term versus long-term success.
Both the academic and popular business press often caution businesses against overemphasizing the short-term over the long-term. Businesses often feel pressured by investors, whether they be publicly-traded or privately-held, for short-term results. Therefore, businesses will often do whatever it takes to provide for the immediate gratification desired. In order to prop up early returns, some companies will sacrifice long-term investment in such things as research, new product development, and employee development and retention. Therefore, a company too focused on the short-term will often miss opportunities for growth and development and stifle innovation and creativity. Businesses who value the long term are also more likely to invest in their relationships with both customers and suppliers, hence increasing their likelihood of enduring success.
However, a firm can also be too focused on the long-term and neglect the short-term. We must remember that to reach the long-term, we have to get through the short-term. Cash flow is critical. While it is important to invest in the future, you need to be able to pay your employees, suppliers, and vendors now to deliver your value proposition to your customers. Also, sometimes focusing on the long-term can distract you from achieving what is necessary in the short-term. I know that I have fallen into that trap myself. When I arrived at the Hull College of Business at Augusta University as Dean, I put much of my emphasis on the development of a long-term plan to increase the college’s enrollment. I learned in retrospect that it would take longer than expected for that plan to reach fruition and I would need to demonstrate short-term “wins” to garner the resources necessary to deliver that long-term plan.
The key lesson here for both MLB teams at the trade deadline and for businesses is that you need to achieve balance between the short-term and long-term. While an MLB team can trade some of its younger prospects to help win this season, it cannot mortgage its future at the same time. Similarly, that MLB team must be willing to strike while it has opportunity, so doing nothing is often not a good option either. In a similar way, businesses need to strike a balance between its short-term and long-term success. While investment is key to long-term success, it is important to survive and thrive in the short-term to reach the long-term.
Here’s hoping you and your favorite MLB team can strike such a balance!
