Managers and academics often lament that Wall Street's short-term focus
makes it impossible for corporations to plan for the long run. Palmisano
disagrees. Yes, there are some on Wall Street, such as the sell-side
analysts who dominate quarterly earnings conference calls, who can't see
more than a few months out. But CEOs shouldn't participate in those
calls anyway, he believes. They should instead focus their energies on
the institutional investors who will embrace the long view if they are
given ways to judge a company's progress. In this edited interview with
one of HBR's executive editors, Palmisano describes how IBM's top
management made significant changes to how the firm set goals and
communicated them to investors. "The model," a rolling multi-year road
map for earnings growth and cash generation, included an emphasis on
R&D investment even during downturns, a plan for execution that
involved every unit in the organization, and a shift toward long-term
compensation. Transparency and open dialogues with large shareholders
were also key. The CEO is a steward, Palmisano argues, charged with
protecting a company and its returns for decades to come. But that
vision need not clash with success on the visible horizon; during
Palmisano's tenure, IBM's stock price soared.