Prioritize Relationships Over Transactions

In today's fast-paced business world, quick wins often measure success—how many sales were closed this quarter or how much revenue rolled in last month. But what if we took a step back and looked beyond these short-term gains? What if we prioritized relationships instead of focusing solely on transactions—the deeper, more meaningful connections with customers, employees, and partners? It might not deliver instant financial results, but the long-term value could be far more significant.

To truly understand the value of prioritizing long-term relationships, we must connect it to a broader business philosophy: prioritizing long-term growth. Just as strong relationships with customers, employees, and partners are critical to sustained success, so is a company's ability to invest in its future. The company must do more than focus on short-term profits; it must commit to continuous improvement, innovation, and quality. Building and maintaining trust-based relationships is just one aspect of a long-term growth strategy emphasizing resilience over quick wins.

Companies that prioritize long-term growth understand that the benefits of investing in relationships extend beyond customer loyalty. A healthy organizational culture, where employees feel valued and trusted, is equally critical to achieving sustainable success. The need to focus on culture is where the teachings of W. Edwards Deming come into play. Deming believed that an organization should focus on continuous improvement and constancy of purpose—working steadily toward long-term objectives rather than being distracted by the pressures of quarterly earnings. The relationships companies cultivate with their employees are crucial to this, as engaged employees drive innovation, productivity, and, ultimately, customer satisfaction.

The Challenges of Prioritizing Relationships

Of course, this long-term focus comes with its own set of challenges. Many companies face significant pressure to deliver immediate financial results, especially from investors who expect quick returns. This pressure can make it tough to justify long-term relationship investments, especially when the payoff isn't immediate​(Harvard Governance Forum).

Most businesses must acknowledge the short-term financial pressures of competitive markets. Investors and shareholders often expect immediate returns, and companies must balance delivering those short-term results and securing long-term value. The key to achieving this balance is recognizing that short-term gains should not come at the expense of long-term goals. Leaders like Jeff Bezos have demonstrated that companies can prioritize growth while still meeting short-term expectations by investing in customer relationships and future capabilities, as seen in Amazon's Amazon Web Services (AWS) and Prime development.

The Deadly Disease of short-term thinking

In Out of the Crisis, W. Edwards Deming emphasizes that short-term thinking is one of the deadly diseases afflicting Western management. He argues that focusing on short-term profits, driven by the pressure to meet quarterly earnings and deliver immediate returns to shareholders, undermines a company's long-term growth. This obsession with short-term gains leads to decisions that compromise quality, stifle innovation, and ignore the broader goal of continual improvement.

Deming gives examples of companies rushing to boost quarterly dividends by cutting critical long-term investments, such as research, education, and process improvement. For instance, management may ship incomplete or low-quality products to show high quarterly sales figures, deferring crucial investments in maintenance and innovation​. This practice jeopardizes customer satisfaction and weakens the company's future competitiveness.

He contrasts this short-term mentality with the constancy of purpose needed for a business to thrive in the long run. In Deming's view, management should focus on improving processes, products, and services that meet future customer needs, thus ensuring the company's survival over time​.

Deming argues that long-term stability and success come from a commitment to continuous improvement, not from chasing immediate profits at the expense of future growth. His critique of short-term thinking resonates today, especially in industries where companies face pressure to deliver fast results.

Unintended consequences of short-term focus

In A Practical Approach to Large-Scale Agile Development by Gary Gruver, there's a detailed example of failure resulting from short-term thinking during HP's transition to a large-scale agile methodology for re-architecting its firmware systems.

Initially, HP attempted a top-down, mandated agile approach, focusing on short-term business metrics like reducing Work in Process (WIP) without securing long-term organizational buy-in. This top-down approach led to the failure of their early agile implementations because the top-down directive needed more engagement and understanding from teams about the value of agile processes. The result was a disconnection between the leadership's push for immediate productivity gains and the ground-level need for a sustainable long-term transformation​​.

In Software Engineering at Google, a notable failure resulting from short-term thinking is seen in how the company addresses technical debt. Google emphasizes the danger of focusing solely on short-term feature development without considering long-term code health. When teams prioritize quick delivery over building maintainable and scalable systems, they accumulate technical debt, which can become overwhelming as the codebase grows. When code dependencies or architecture changes are repeatedly delayed in favor of short-term wins, it leads to chronic difficulties in maintaining and adapting the system as new features or fixes are required​​.

One specific practice highlighted is the risk of paying off technical debt. Over time, the cost of maintaining poorly structured code multiplies, making it harder to add new features, fix bugs, or refactor. In the long run, this leads to decreased productivity and hampers innovation​. The engineers at Google experienced these issues firsthand. They had to implement strategies like continuous integration and automated testing to mitigate the effects of rapid development that neglected long-term sustainability​​.

Opposing Forces

CEOs often feel trapped between these two opposing forces. On one hand, they know that long-term investments in employee and customer relationships are critical. But on the other hand, they need to deliver short-term results to keep shareholders happy. In The CEO Tightrope, Joel Trammell talks about this balancing act and how focusing on employee engagement leads to better customer satisfaction, which drives long-term financial success.

A key example from The CEO Tightrope that illustrates the balance between long-term relationships and short-term financial pressure is Trammell's discussion of shareholder expectations. CEOs regularly face intense pressure to deliver quarterly results, but this focus can come at the expense of customer and employee satisfaction. Trammell emphasizes that companies must avoid shifting entirely toward short-term gains for shareholders, as this erodes long-term growth potential. Instead, he advocates for a balanced approach—prioritizing all stakeholders, including employees and customers, to ensure sustainable success.

In this example, Trammell explains that focusing too heavily on making quarterly numbers might deliver immediate financial returns. Still, it can eventually cause the business to deteriorate, leading to dissatisfied customers and disengaged employees. Balancing short-term performance with the broader goal of long-term relationship-building, as he advises, helps to create a stable, thriving company.

Striking the Right Balance

So, how can companies find that spot between delivering short-term results and building long-term relationships? The answer lies in balance. Companies like Amazon have demonstrated this by driving long-term growth strategies while meeting short-term financial expectations​(INSEAD Knowledge). It's not an easy task, but it's one that more businesses must embrace to thrive in the long run.

How did Amazon do it? Early on, Jeff Bezos clarified that Amazon would focus on customer obsession and long-term growth, even at the expense of short-term profitability. This philosophy allowed the company to invest heavily in infrastructure, including developing Amazon Web Services (AWS), which eventually became a highly profitable venture​(Cascade Strategy).

For over a decade, Amazon sacrificed immediate profits to build logistics networks, enhance customer service, and expand its product offerings. These investments positioned the company to handle massive order volumes and ensure customer satisfaction. This approach wasn't without risks—Amazon often faced scrutiny for its lack of short-term profits. However, Bezos' long-term vision, exemplified by innovations like Prime Membership, has paid off. By 2021, Prime had more than 200 million members globally, driving consistent revenue and increasing customer engagement​.

The key takeaway from Amazon's strategy is that they secured growth by maintaining a long-term focus and found ways to deliver short-term financial results through innovations like AWS and Prime. This balance between long-term infrastructure investment and short-term revenue generation allowed Amazon to thrive, illustrating how companies can strategically blend both priorities.

Long-Term Relationships Are Key—But Not at the Expense of Short-Term Results

Prioritizing relationships over transactions is the smart move for businesses looking to succeed in the long term. But that doesn't mean ignoring short-term financial performance. The best companies are the ones that can build trust with their customers and employees while still delivering the results investors expect.

The key takeaway? Focus on building meaningful relationships while keeping an eye on short-term performance. It's not about picking one or the other—it's about finding the balance that works for your business. This balance will lead to sustainable growth, happier customers, and a more engaged workforce.