On the fifth of May, the Securities and Exchange Commission proposed letting a public company file one report covering the first six months of its year in place of three quarterly ones, with the rest of the year folded into the annual report.1 That headline traveled fast, because it sounds like relief. What traveled less is a footnote in the Chairman's own statement, which says the change would not touch how often a company holds an earnings call or issues an earnings release, because that frequency "has been, and will continue to be, determined solely by the company."1

The piece of the quarter that wears people down was never really the filing. Paperwork is tedious and it is also finite. The pressure comes from the call, from guidance, from a number somebody said out loud ninety days ago in a room full of people who wrote it down. None of that is required by the regulator. A company schedules its own earnings call and decides whether to give guidance at all. The regulator is offering to lift a requirement while the cadence people actually live inside stays exactly where they put it. The Chairman was open about his motive, calling the proposal part of an agenda aimed at getting companies to go public and stay public, so read it as a regulator with a goal.1

The clock nobody chose

American firms have not always reported four times a year, and three accounting researchers used the changeover as a natural experiment. They tracked companies in the United States moving from annual reporting to semiannual and then to quarterly across the years 1950 to 1970. Firms did not all change at once, since many New York Stock Exchange companies were already reporting quarterly at the exchange's request, which let the authors compare firms whose reporting frequency rose against firms whose frequency stayed the same. Their conclusion, published in The Accounting Review in 2018, is that more frequent reporting came with "an economically large decline in investments," and that the decline fits best with frequent reporting inducing myopic behavior in management.2

The paper is eight years old and the data behind it is much older, and the SEC's own proposing release cites studies on both sides of the question,3 so I would not lean on the size of the effect for a business operating now. The direction is the part worth taking seriously, and the authors attribute at least part of the decline to managers protecting the near-term number. When the gap between reviews got shorter, the money going into things that pay off later got smaller. No one announced a policy of shortening the horizon. The horizon came in because the reporting interval came in, and anybody deciding whether to start something has a rough sense of how many reviews it will have to survive before it has anything to show.

The shortest interval at which somebody has to show a result sets the longest piece of work an organization will attempt.

It repeats all the way down

The same arithmetic runs inside private businesses with no filing obligation at all, at every layer of the building. A two-week sprint review sets one horizon and a quarterly business review sets another, with a monthly forecast call somewhere in between, and in most organizations I have seen, those were never reconciled with each other, let alone with how long the work actually takes.

I have sat through enough quarterly reviews to recognize the move where a leader defends a long program by locating the one piece of it that finished. The program may be perfectly healthy. The review is not built to hear about something that will not be legible for another four quarters, so the presenter goes hunting for whatever is legible today. Run that eight times in a row and the team learns to propose work that produces a visible piece every ninety days, which is a different portfolio from the one the strategy asked for.

I have written before about how the worth of a piece of work gets settled the moment somebody selects it, and I am not going to relitigate that here. The clock sits underneath that argument. Selection happens inside a review rhythm that has already ruled out anything too slow to show progress on schedule, so by the time the list is being built, the filter has run and nobody watched it run.

What an optional clock asks of you

If the proposal is adopted, every public company gets handed a question it has not had to answer in half a century. How often does this business actually need to report on itself? Private companies have always been free to answer that question and have mostly left it alone, because the quarter arrived as furniture and furniture is not something you interrogate.

The exercise does not need the rule to pass. Take the longest thing on your strategy, the one whose payoff sits three years out, and count how many reviews it has to survive between now and then. Then look at what each of those reviews is structured to reward. If the answer is twelve reviews, each one asking what moved this month, you do not have a three-year program. You have a monthly program wearing a three-year label, and the people running it worked that out long before you did.

Stretching every interval would be a poor fix. Work a team can ship weekly earns a weekly look, and a frequent review can serve long work well when it asks what the team learned and what needs adjusting against the long objective, saving the demand for a finished result for the interval where one can exist. The damage comes from an interval borrowed from the filing calendar, or from a framework somebody read about on a plane, demanding results from work that does not move at that speed, and almost nobody in your company remembers deciding that.

So here is what I would put on the table. Which of your review rhythms did somebody actually choose, and which ones are simply there because they were there when you arrived? And if a new board member who had never heard of a 10-Q asked you what the ninety-day cycle is for, what would you tell her?