EQ: Why must Iran's business leaders adopt a long-term mindset?
In recent weeks, there have been growing murmurs that the Iran Nuclear Deal is under threat. Iran has not seen a boost in its economic performance that many had expected immediately following the lifting of sanctions. Analysts are concerned that without tangible results in the short-term, the deal will become politically untenable for the Rouhani administration. In the face of these fears, Rouhani has prioritized economic reforms that will deliver benefits in tandem with coming election cycles. Similarly, Iranian business leaders are pitching investment opportunities aggressively, behaving as though the window of opportunity could close at any minute.
But the success of the Iran Deal—an agreement that overturned thirty-five years of economic and political marginalization—has an inherently long-term orientation. Transition Day, on which all provisionally-lifted sanctions will be permanently removed, is slated for October 20, 2023. It is clear that if Iran is going to maximize post-sanctions opportunities, and reach its remaining milestones, it must think beyond the next few years and conceive a long-term roadmap for success.
Oxford historian Homa Katouzian has described Iran as a “short-term society” where “history [is] a series of connected short runs.” A lack of “accumulation and preservation” has meant that successes in good times did not build towards maximal levels of development or prosperity in the long-term. Iran has been held back by “the basic norms of arbitrary state and society,” where a “lack of structure” leads to “disruption.” Though a particular feature of Iranian history, this condition can be seen beyond Iran. As the behavior of business leaders and policymakers around the world attests, in any atmosphere of uncertainty, the fear of disruption means that short-term thinking supplants the long-term mindset.
The challenge of thinking long-term is an area of focus for Thimon de Jong, a futurist who specializes in “future human behavior and how it relates to business strategy.” He is the founder of Whetston, a strategic foresight think tank based in the Netherlands. Whetston works with some of the world’s leading companies, including Microsoft, Vodafone, and Morgan Stanley. As de Jong explains,“I do two things. Commercially, I give presentations and workshops around the world in all kinds of different industries. [I also] lecture at Utrecht University, where I teach masters students. They keep me fresh and on my toes. Teaching is the best way to test a lot of ideas and theories.”
Recently, Thimon has explored the importance of a long-term mindset in a time of global “short-term hysteria.” His research suggests that business leaders around the world have developed short-term mindsets, often concerned only with the opportunities, risks, and necessary actions of the next fiscal quarter. Focusing on the short-term means ignoring the long-term, and business leaders and policymakers are spending little to no time creating robust plans to achieve larger goals for the next, five, ten, and even fifty years. Thimon believes a correction is underway and that the most successful business leaders are now beginning to “try and seek that balance again.”
There are numerous drivers that have caused the short-term hysteria, but they boil down to a single buzzword: disruption. Disruption is typically thought of in technological terms— a new technology is developed that offers radical efficiencies, and the company that owns that technology has a meteoric rise, displacing traditional powerhouses. Ride-sharing company Uber, now valued at over $60 billion USD is a prime example. Technology is changing so rapidly that businesses rarely have time to adapt. Thimon cites Harvard historian Jill Lepore, who writes about a“disruption machine” and a belief in the primacy of technological innovation that has led business leaders to become “transfixed by change [and] blind to continuity.”
Iran must contend with both economic and political disruptions. To Thimon, political and economic shocks like Brexit or the rise of Donald Trump are prime examples of disruptive developments that feed short-term thinking. “It is the same anxiety. There is more anxiety than just the tech. We live in emotional and uncertain times.”
Recent political and economic disruption in Iran has elicited largely positive emotions. The election of Hassan Rouhani, the successful conclusion of the JCPOA, and the implementation of sanctions relief, have all “disrupted” the previous business environment. Much like technological disruption, these developments have brought new optimism to the business community. With new conditions come new opportunities, and the energy seen in Tehran’s private sector today is as electrifying as that of Silicon Valley. In both places, a business community is confronted with the enormity of its own potential. But the challenge of rising to the occasion breeds anxiety alongside optimism.
Every major Iranian business is racing to secure its post-sanctions position—finding viable partners, securing investment, launching new projects and products. Even while the overall pace of economic reintegration remains slow, given challenges such as the hesitation of major banks to re-engage Iran, the pace of business development activity is frenzied. There is a clear fear of “falling behind” the competition. Thimon encounters a similar anxiety in business leaders in Europe, even among companies with little competition. “They are scared even if the numbers say they are fine, the fear of being disrupted changes their mindset.”
Importantly, short-term thinking is not limited to senior management in Iran. There are signs that professionals at all levels, unsure of how to take advantage of new opportunities brought about by sanctions relief and the related disruption, are falling into the trap of short-term thinking. Data from IranTalent.com, Iran’s leading jobs website, suggests that while unemployment in Iran is high, companies are still struggling to find and keep suitable candidates.
Speaking at a recent conference, IranTalent CEO Aseyeh Hatami noted that the best qualified candidates in Iran today are “looking short-term” in a job market where being “poached” with better packages and better titles is common. Thimon sees this as a familiar “war on talent” where companies are exacerbating the situation. “They are encouraging this kind of job-hopping with salaries that are based on annual performance, and that is short-term [thinking]. I talk to many middle managers and they admit how they can artificially boost their annual performance, get headhunted, and then leave.”
Once individuals reach senior positions in Iranian companies, they tend to reward themselves with higher compensation without any regard to potential damage to long-term value for the company. Says de Jong, “The brain is hardwired to have instant gratification. You need some constraints. You need some structures to protect people from how the mind works.” Without protections, business leaders disregard the creation of robust future value. This lack of foresight results in businesses invariably failing. De Jong points out that “the person that follows has to fix the mess. And that goes to one of the practical takeaways—we should reward for the long-term.” In other words, Iranian businesses must learn to compensate their employees with regard to a long-term strategy.
It is clear that both in Iran and globally, anxiety regarding “disruption", whether political, economic, or technological, is leading business leaders and professionals to fall into a short-term mindset. Thimon thinks it is time for a correction. “If you look at several indicators, we have reached a point now that we are so focused on the short-term, that we are at a tipping point where long-term thinking will come back to balance it out. We are out of sync now.” He cites a number of encouraging signs that business leaders are waking up to the dangers of short-term thinking. In February of this year, Larry Fink, the CEO of BlackRock, the world’s largest asset manager, wrote a widely circulated letter addressed to the chief executives of all S&P 500 companies, “asking that every CEO lay out for shareholders each year a strategic framework for long-term value creation.” Fink’s letter also demands that policymakers take “a longer-term perspective” to “help support the growth of companies and the entire economy.”
For Iran, a commitment to long-term thinking is imperative. The lifting of sanctions has brought not only optimism and anxiety, but also a unique historical turning point. For the country to capitalize on sanctions relief does not mean achieving near-term profits, but rather securing long-term value for the economy and for society. Thimon believes that this effort must be led from within Iran, an important notion for a country which has always prided itself on the ability to develop its own political and economic models. “You need thought leaders, you need local gurus. You need a Unilever of Iran or an Apple of Iran, the two or three companies that everyone sees as the example of best practices and how to succeed in the next wave of business.”
Thimon suggests that leading businesses must focus on three efforts to boost long-term thinking. Firstly, they must ensure that long-term strategizing takes place as a matter of best practice. This involves budgeting the time and resources for strategic meetings, without distractions, where the mind can engage in what Princeton psychologist Daniel Kahneman calls “slow thinking”—effortful, logical, calculating, and conscious. The output of these meetings should be the actionable “strategic framework” that Fink suggests in his letter. Shareholders can then use stated goals to keep the organization and its management accountable. Thimon’s experience advising major companies has shown him that “to actually do long-term thinking is very difficult,” but that the benefits are absolutely worth it. During the 2009 financial crisis, Unilever CEO Paul Polman made long-term thinking a key principle of the company’s strategic planning, going so far as to eliminate quarterly reporting. The strategy has proven highly effective, with share prices hovering near all-time highs.
Secondly, businesses must ensure that they reward long-term thinking through standardized incentives. Some Iranian companies have found intelligent ways to earn long-term commitment from their employees. For example, the Iranian subsidiary of British American Tobacco, BAT Pars, provides new hires a very clear career progression plan, including training opportunities and the possibility of promotions to postings abroad. Despite offering lower base pay than their competitors, the ability of employees to carve personal career paths within the company has made BAT Pars one of the most successful entities in hiring and retaining top talent in Iran. Aseyeh Hatami describes this as “giving candidates a dream”—a notion that inevitably entails long-term thinking.
Finally, long-term thinking needs to become an integral aspect of Iranian business culture. The new wave of entrepreneurship in Iran is encouraging. Young business leaders can act as what Thimon calls “change agents,” helping to drive the new mindset towards longer-term strategies. After all, the companies that seek to be disruptive are often the ones most in need of a long-term strategy. “You might want to become the unicorn start-up, but many companies grow slowly at first. Founders and investors have to be in it for the long-term to be rewarded.” Moreover, Thimon’s research suggests that the relatively large proportion of family businesses in Iran’s private sector might help in the effort to make long-term thinking more palatable. “Imagine your son or daughter working at the company. If you know that your children are going to work in this company, would you make different decisions?”
Thimon realizes that thinking slow, thinking of a career path, thinking about the next generation “sounds a bit boring.” But he is adamant that success in today’s uncertain environment “is all about moderation.” Understandably, Iran wants to race aggressively into the future, to embrace disruption and change. “Now the sanctions are lifted and Iran wants to speed up and make up for times lost.” But the country’s political and economic leaders need to ask key questions. “What is too fast, what is too much, and where is the long-term program?” Thimon’s final observation is that Iran must learn from the past in order to create its future. “In a way it is brilliant that Iran is a little late to the party because it can see the mistakes made in other countries, in other business cases, and find the best practices, in order to ultimately avoid the mistakes the BRIC countries have made in the last twenty years.”
As the economies of Brazil, Russia, India, and China begin to falter, struggling with structural issues that were never properly addressed, Iran should take heed. Thinking long-term now will mean achieving greater success in the long run by accumulating and preserving value.
Photo Credit: Whetston