In a recent article in the McKinsey Quarterly, there is a
new metaphor in the business lexicon. It is Performance and
Health. It purports that businesses, like people, will have
unhealthy lives if they fail to abide by long-standing, wholesome
We have been talking these past weeks about an average increasing
longevity of the human population, a surfacing of economic
problems dealing with capital flight, and business models
that impact our ability to rise out of the dust, into financial
Indeed, according to McKinsey: The fact that ten of the
largest 15 bankruptcies in history have occurred since 2001
is a strong deterrent to business building, playing up its
For those individuals who have established a firm foundation
in securing income replacement, health insurance and three
separate pensions (one pension cheque will never do), and
who now look to the financial markets for high-end investment
return, to rise to the challenges of longevity, this is alarming!
Certainly the best advice in the stock market investments
arena is the buy and hold strategy. Day trading is, more than
anything else, a fad, and has led to tumultuous misfortune,
rather than grand empires; always remember: Rome wasnt
built in a day.
What Mckinsey had to say is instructive indeed: One major
European financial-services company recently discovered how
easy it is for performance and health to get out of balance.
After the company had achieved an impressive turnaround
in its short-term financial performance in the three years
to 2004, it found to its dismay that this success had been
accompanied by falling customer service levels, a huge increase
in staff turnover, and a fall in its share price.
Management complained that the financial markets didnt
understand what the company had achieved. But in reality,
they understood all too well, that its short-term success
had been purchased at the expense of its underlying health.
Such short-sighted behaviour is widespread. In one recent
survey, a majority of the managers polled said that they would
forgo an investment offering a decent return on capital if
it meant missing their quarterly earning expectations.
So while in the business jargon, stretch objectives are
the order of the day, remember that even elastic can be over-stretched,
and loose its tension. In the case of underwear that may be
exceedingly comfortable, but definitely not so, when we have
invested our money in the business stock.
Our role as individual investors therefore must be a loud
call for corporate probity and better governance. This is
what is now being called leading from behind.
And while that is going on in the corporate world, as individuals,
our personal financial health also needs stocktaking!
Like the health of the human body, our financial health
may appear good, on the surface or in the short term, but
our habits and lifestyle, may be doing serious damage to our
ability to prosper in the long term.
I always say that modern medicine will keep us alive, but
modern medicine has not made any major breakthrough in curing
But it is more likely that we will die later, rather than
sooner from the disease. We are more likely to live longer
and be disease ridden, and popping pills, or connected to
oxygen machines in motorised wheel chairs, then otherwise.
As the South African, Dr Marius Barnard, of the first heart
transplant team, has said, As doctors we will replace
your kidneys, but we will completely remove your savings!
So, on the individual level, long-term health is dependant
on financial performance, or what is the same thing, your
ability to pay.