Subscribe to my Feed
« For Jackie Ramos and Bank of America, two wrongs didn’t make things right | Home | What will it take to bring the banks on board? »
Adjust your time horizon
By Lauren | December 11, 2009
Continuing my Friday series on keeping your business out of court, let’s turn to a problem that gets a lot of people in legal trouble: too much focus on the short-term. Yesterday, I reported on Bank of America’s decision to fire Jackie Ramos for helping customers misrepresent their circumstances so they would qualify for the bank’s debt modification programs. Bank of America was well within its legal rights to fire Ramos, but the bank’s decision to squeeze hefty fees and interest rates out of those same desperate customers reflects a dangerously short-term focus. Yes, the bank is raking in money now, but it doesn’t seem to have thought through the long-term consequences of its tactics. And Bank of America isn’t alone. Congress is now contemplating sweeping curbs on banks’ fees and credit card rates because so many banks have indulged in senseless gouging. As a consequence of their short-term greed, their ability to profitably manage consumer credit may well be severely curtailed in the long run.
Many of the scandals that have rocked the financial industry, including the most recent subprime mortgage debacle, have their roots in short-term thinking. Investors started demanding increased profits every quarter, severely punishing any company that slipped below expectations. As a result, financial service providers took ever-more-dangerous risks to keep their quarterly profit margins on the rise. It couldn’t last - bubbles never do - and the ultimate crash was catastrophic. If investors had been willing to profit over the longer term without overreacting to each short-term slip, the whole mess might have been avoided.
Short-term thinking makes every minor hiccup seem like a disaster in the making, and encourages quick fixes that can have significant long-term consequences. If, while scrambling to fix a short-term problem you make a critical mistake, it can easily come back to haunt you in court. It’s important to respond quickly when crises develop, but it’s equally important to think through the likely long-term impact of your actions before you do. Nobody cares how quickly you get to the wrong answer.
Topics: Business Ethics, Risk Management, business communications, customer relations, ethics |