Each month, quarter, and year, there is a break neck run by many companies to attain the numbers set by management projections. The world has been turning that way for quite some time. Most of us have been numbers chasers at one time or another and that is not a bad thing. Most of the time the numbers are not arbitrary and help company leadership to allocate resources and budget realistically based on expected revenue.
Even though meeting projections is normally a productive policy with good intention, it can sometimes have negative effects. There is a trap some companies fall into that becomes counterproductive in regard to the company’s overall goal, to make money (meaning turn a profit). You think you go to work every day to serve customers and provide fulfilling careers? How cute. We would like to think we are above the selfish motive of doing things with making money being the true goal, but with just a few exceptions we are just kidding ourselves. Seldom is there some more noble cause than plain old profit. Whether we sell cargo insurance, manufacture braille Bibles, sell wheel chairs, run a food truck, make baby cribs, or run an addiction self-help website, if it is a private company the common goal is typically to make money. Sure, there are byproducts we work to create that are needed in our pursuit of money such as serving customers, enjoying our work, and providing careers, but if we didn’t need those byproducts to make money, we would not have them. Nope, in most cases… it’s for the money.
Here is where I will contradict myself. Not all companies pursue the objective of making money. Some companies become broken. The corporate culture drifts off into a ditch and the company collectively forgets why they get up in the morning and go to work. Instead of working hard to make a profit (make money), the driving force becomes working hard to ‘make the numbers’. Same thing? I think not. Many fine companies with high gross revenue have declared bankruptcy. They made their numbers, but they forgot about the money.
Organizations that are hyper focused on the numbers tend to set the tone that there is nothing more important. This creates an underlying culture for the staff which is the ‘number’ is made no matter the cost. Along with increasing sales for alcohol and ulcer medication, this type of broken culture creates dirty revenue we can’t call our money. We can’t call it our money because our team spent so much money trying to attain the numbers we can’t keep it. Most of us have seen, or been a part of, an epic numbers chase that moved heaven and earth to make the numbers. The numbers were paramount. There was no effort spared, no resource out of reach, and no task too great, for us to make the numbers. Human sacrifices were not out of the question and there was a fire and brimstone hell to pay if we didn’t make the numbers. So we made them. We also didn’t make a clean profit.
Margins are thinner than ever. Operating costs are up, and downward pressure on selling prices is the norm. Net profits are what count. At the end of the day unless there is some sort of freaky common core math that says otherwise, efficiency counts. What we spend to make a dollar is just as important as making the dollar. In the case of a low margin company that only has a final net profit of just three, four, or five percent on a month’s revenue, making extra ordinary efforts via expensive resources to achieve the last 5% of revenue to ‘make the numbers’ just doesn’t make good business sense. This is further highlighted by the fact that companies that strain to make the numbers in a particular month are often merely clawing in revenue from the next month. This sets them up for the same profit stealing process for the following month. Conversely, companies that have an efficient and well vetted process and procedure don’t claw the additional 5% from the next month’s total revenue. They save the herculean efforts and instead focus on why the numbers were not made and make adjustments if warranted. Not as exciting as a spectacular 25th hour effort, but the company will ultimately be able to keep more of their revenue as profit not lost on undue operational costs.
There are even invisible drains on profit via increased operational cost that almost go unnoticed. Take for instance the resource burden of a high employee turnover rate. Pressure cooker environments will influence more people to fire their employer than would occur in a healthy work environment. You won’t see that cost as a direct expense on the P&L in the ‘abused staff’ column but you will see it in the human resources hiring and training expense. The higher expense would not be there if your employee did not fire you. Combine the hiring and training expense with lost production and high error rate due to inexperienced staff, and now your profit thief is like a Ninja who is hard to see but you know is there.
Meeting the numbers is similar to being addicted to something like nicotine. The gratification of achieving the numbers is alluring. Doing so often gets staff a slap on the back and a ‘well done’. Higher level management isn’t immune to the addiction either. Whether you are reporting to a department director, a site director, a division director, or a board of directors, it feels good to say “We made the numbers”. Unfortunately the higher the “We made the numbers.” report goes up the food chain the less aware the players are of what expense went into ‘making the numbers’. The staff who were responsible for achieving the numbers and burned the heavy fuel to get there, quite often only know ‘gross margins’ not ‘net profits’. The staff often is not aware they are operating at a 25th hour expense level that made their efforts not economical.
This isn’t to say tracking your numbers is a bad thing and should be abolished. There needs to be attainable projections and they should be accomplished if possible. Although attaining the numbers at all costs hurts more than helps. It generally masks the problem of why the company was struggling to make the numbers in the first place and denies management the opportunity to learn from the numbers. So it’s all about the numbers? I guess it is after all.