Wednesday, September 19, 2012

Cards Talk And Numbers Don't Lie

When I was growing up, my Mom always gave us clothing, underwear and pajamas for Christmas, never toys, or games.   My Dad's approach was much simpler; but just as practical.   Dad just got out his wallet and handed each family member and even guests visiting us, a crisp $20 bill and that was when $20 was actually worth something.  Of course, Dad had an ulterior motive.   About an hour after eating a sumptuous Italian dinner, it was time to play Poker.  So each of us took out our $20 to buy Poker chips to play the game.  Since some of us really did not know a winning hand from a losing hand, of the many sayings Dad had for every aspect of Poker and everything else in life, he would say, "Cards talk and numbers don't lie",  meaning it really did not matter what you thought you had in your hand, the cards would dictate whether had you won or lost.  

This saying, Cards Talk And Numbers Don't Lie, also applies in business.   After years in Senior Management, I have heard many emotional arguments from staff members to buy everything from purified water for our employees, to automatic flush toilets in our office buildings.  The most impassioned arguments often come related to buying new automation and additional headcount.  

Everyone wants the latest and greatest technology.   When asking for budget to buy new technology, the story is usually that we need the additional glitz to impress our clients and customers.  And, when I push back on that argument, saying that most of our clients and customers don't even use the technology we have now, I am then told that new technology will improve productivity and so we will need fewer people to do the job.   If that argument was true, we should have half as many employees today managing twice as much business given the money we have spent on technology in the last ten years.   What new technology has given us is global connectivity so that we can function as one company from offices all over the world and much better reporting capability.   These things are extremely valuable.   

Specific to new headcount, our most expensive budget item, when adding new people, we must be concerned with Return On Investment (ROI) as we add additional people.   To some degree, the Jerry McGuire comment, "Show Me The Money" is applicable.   The bottom line is where is the business, or the revenues to pay for additional people.   The weakest argument for more employees is that we need them to provide "quality service".    As a service company, it is true that quality service is an imperative; however, we need to see the numbers to justify our most costly investment, people.  

And, then there is the whole issue of results.  When all is said and done, numbers demonstrate sales, revenues, employee performance, profit or loss and a myriad of other things that are measurable.  Hope is not a strategy.   Just hoping that numbers are better does not make them better.  Numbers are the basis for management decisions and changes in either practice and procedures, headcount, or even organizational  structure.  Metrics tell us if we are succeeding and must be used as a management tool to implement continuous improvement. 

Cards talk and numbers don't lie; but sometimes managers do exaggerate, or make emotional arguments to add expense to a company, or justify certain behaviors and or poor results.   Any President/CEO worth his salt will always push back demanding facts to support new expenditures, or arguments impacting management decisions.  Ideally, each year, companies should implement zero based budgeting making every manager fight for their priorities.   To do otherwise, is to end up with lots of unnecessary expenses that will drag down profits.   At the end of the day, a company that is not profitable will not be in business for long.

1 comment:

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