AlastairThomson.com

There’s a stretch of road I walk along fairly regularly. It’s about a mile, perhaps a mile-and-a-half, long.

In times gone by, this was a wealthy area of town. The houses are big, set back from a busy road, and raised up a little from the road level.

I guess in the days of horses and carts, when these houses were built, it was a way of keeping the well-to-do away from the less pleasant sights and sounds of the town they lived in.

If you look out the living room window of any of these houses, I doubt you’d see the top deck of a double-decker bus driving past. That’s how much higher than road level they’re set.

All the houses have well-tended gardens sloping down to road level from the house, with a driveway on one side. The gardens typically end by the road with a lovely stone wall somewhere between four and six feet high, over the top of which pokes a 10 to 12-foot high hedge.

From the inside this means you can sit in your front room and look out to a nice garden and the greenery of your hedge instead of watching riff-raff like me going about their daily business.

Nowadays many of the bigger houses have been converted into care homes. The mid-sized ones into offices for lawyers and accountants. The smaller ones into flats.

But those stone walls and high hedges still come in handy, because whether you’re a Victorian mill-owner or a modern-day senior partner in an accounting firm, you can enjoy being cocooned in greenery while still being less than a mile from the centre of town, thanks to the 12-foot hedge down by the pavement.

Shrouded in vegetation, you can almost forget how busy the road is.

The traffic is constant, but free-flowing. Drivers can rely on covering that stretch of road at a good 30mph on their way from the outskirts of town into the town centre.

About two-thirds of the way along my usual route, there’s the town’s main hospital – in fact, the main hospital for quite some distance around as this is the main economic nexus for a largely rural county.

Once you step outside the town boundaries, the next stop is the Dales.

It starts with good intentions

On my usual walking route, I have to cross five or six side-roads which come off the main road and lead to some pretty tree-lined avenues lined with nice houses.

Not as nice as the mansions lining the main road, but still pretty nice.

Crossing these roads can be a bit hairy. When the traffic barrelling along the main road needs to turn left, the cars tend to be going at a fair speed.

And because the streets are wide, with generous-sized pavements, the turns tend to be fairly gentle, meaning drivers can keep up a decent speed while turning.

At some point, someone had the good intention of doing something about this.

Crossing those wide side streets on foot got a bit more exciting as automotive technology improved. When pedestrians set off from one side of the road, it was unlikely they would get to the other side without encountering cars, busses, or vans coming from one direction or the other.

I imagine there were probably some accidents, maybe even some fatalities. So the council was galvanised into “doing something”.

And as part of that process, I’m sure someone did the research that showed if you build a little island in the middle of the side-road, near where it joins the busy arterial route, then pedestrians will only need to get half-way across before they reach a place of safety.

I’m not an expert on traffic planning, but I’m prepared to bet that adding these traffic islands generally do reduce deaths and injuries by a significant amount.

So far, so good.

Doubling down

As part of putting in the crossing islands – perhaps at the same time, perhaps later…those crossings predate my acquaintanceship with this town – someone at the council thought it would be a good idea to make those crossings more accessible to people with disabilities.

An excellent idea – not enough is done to make our streets and buildings accessible to people with disabilities of one sort or another, in my view.

There was almost certainly some funding the council could access to lower the pavements at those crossing points and put in what my daughter used to call “bobbly pavements” so vision-impaired people could identify where the crossing was, and so on.

It wouldn’t surprise me if there was some government target to make sure councils had x% of all their road crossings accessible to people in wheelchairs, or some such thing.

So all half-dozen or so side-roads along this mile-and-a-bit stretch of busy road have had the benefit of these enhancements.

Which is great news if you’re visually-impaired or physically infirm.

Apart from one thing.

The importance of thinking it through

Clearly these are important works, which could make a big difference to people’s ability to get around. And the pavements and crossings have been beautifully done. I can tell by looking at them that they were conceived with the best of intentions, and the people doing the work did a great job.

They might be some of the finest road crossings I’ve ever seen.

At least, that’s true if you only look at the physical installation in isolation.

But if you take a moment to reflect on the purpose of these facilities, they’re terrible. Possibly worse than having to do a mad dash across a wide side-street with cars and vans whizzing past you in order to get to the other side.

And the problem goes back to what makes this stretch of road actually quite a pretty stretch of road – the high stone walls and the 12-foot hedges.

You see, for aesthetic reasons (which, on some level, I could understand), or perhaps because best practice says this is the way you build this type of crossing, the “bobbly pavement” is positioned where the curve of the corner finishes and straightens out for the side-road proper.

That means, at the point where you’re supposed to cross the road, you have zero visibility of the cars barrelling along the main road which want to turn left onto the side street where you’re standing.

You can’t see their indicators. You can’t see the vehicles themselves to see if one of them looks like it’s slowing down to turn. You can’t even hear them all that well because the 6-foot high stone wall, topped by a 12-foot manicured hedge, deadens the sound of approaching traffic.

And because this is a busy, but not nose-to-tail traffic, sort of road, cars can belt along the main road at 30mph or more and pretty much maintain that speed while turning the corner.

Imagine you have mobility issues, or you’re in a wheelchair, or you’re pushing a pram.

You can use this well-constructed crossing, intended to help people get across the road safely, but only if you take your life in your hands and launch out across the road with absolutely no idea of what traffic might be hurtling around the corner the next moment.

At no point is this a good idea at any point along this stretch of main road.

But it’s a genuinely terrible idea when it comes to crossing the road which leads to the biggest hospital for 50 miles around.

Last time I checked, the people heading towards a hospital are mostly sick people. They might have an injury or a broken bone, a disability or a physical condition, be in a wheelchair or be visually-impaired. At the very least, I’d expect the incidence of those conditions to be significantly higher on the crossing place on the road leading to the hospital than on any other random street corner in the town.

What should happen is irrelevant

Obviously what should happen is that drivers on the main road should keep to the speed limit, not tear around corners like a driver on the Paris-Dakar rally, and be driving at the 10mph or so the Highway Code says is the speed to take a corner at.

But, in business, what should happen is irrelevant. You have to work with what really is happening or you end up completely delusional.

I’m sure all the local councillors congratulated themselves on investing to make road crossings easier and safer. Along the way they probably ticked a government target of some sort. I haven’t checked, but there was almost certainly a press release of some sort trumpeting the road safety improvements as these crossings were clearly part of a fairly significant plan to make it easier for people walking into town to cross the roads the needed to cross along the way.

But like a lot of target-setting and self-congratulatory corporate PR, this was largely a waste of time. It might even have taken the cause of road safety backwards.

On this stretch of road, by far the safest place to cross the side-roads, from the point of view of pedestrians trying to spot oncoming traffic, is right at the apex of the corner, before the kerb starts to straighten up again to form the pavement of the side-street.

From that viewpoint, you can see traffic coming in both directions, hear if their engines are slowing down to turn, spot if their indicators have been switched on, and whatever other information you might need to decide whether it’s safe to cross the road.

The problem is, at that point in the road, you’re a good 10 feet away from the crossing island in the middle of the road, so you’re back to having to cross the whole expanse of the road in one go again – precisely the problem the crossing islands were meant to solve.

And if you happen to be physically challenged in some way, or in a wheelchair, good luck getting off the high kerb onto the road itself to cross over. You’re also 10 feet away from the point where the pavement has been lowered to road level to make that an easy process.

So rather than the road crossing making it safer to get from one side of the road to another, the net result of this project has been to give pedestrians two unenviable choices, both of which are riskier than using the crossing point the way it was intended.

The stone walls and towering hedges along this stretch of road means there is no safe way to cross these side-roads despite £000s, no doubt, being spent on lowering pavements and putting in crossing islands.

This applies to corporate objectives too

While I’ve been babbling along, you might have recognised some of these situations in your own organisation.

It’s a good example of the outcomes from a lot of corporate objective-setting.

Someone starts off with a good intention – whether that’s “let’s make crossing the road safer” or “let’s work to delight our customers”. Both are noble objectives.

There’s an investment case – which might be financial or might be something that feeds into a wider corporate objective of some sort. If a business is worried about customer churn, there might be an impetus to invest in a new CRM because, after all, that’s how we serve our customers better, right?

Someone throws some numbers together to show that if churn reduced by just 2%, the new CRM would pay for itself.

Some people call that a “business case” (although I don’t – I call that “wild speculation”). Just as I’m sure someone in the Transport Dept at the local council worked out that if only 2 people weren’t hospitalised as the result of a car accident crossing the road each year, the new pavements and crossing islands would “pay” for themselves.

Next is an unhealthy focus on the process, not the result, as a result of which the desired outcome becomes less likely than it was before.

The minute your “improve customer service” objective becomes an “implement a CRM” objective, you’ve probably lost whatever benefits there might have been, making the investment largely pointless.

You see, it’s entirely possible to implement a new CRM system at great expense. Tech providers will queue up to help businesses do that.

However, if those businesses persist on keeping their surly, unhelpful staff because they’re cheap to employ, force customers to go through lots of new processes “because the CRM system says we have to”, and delivers the same shoddy products as they delivered before, frankly a new CRM isn’t going to help you in the slightest.

But that’s what almost inevitably happens when the process takes over the original noble objective.

Just like the desire to put lowered pavements and crossing islands in the more aesthetically-pleasing place, from the point of view of a road designer working in isolation, forgetting that speeding drivers and 12-foot high hedges are also part of the environment within which a decision to cross a road is taken.

And finally, there’s the hubris of delivering a project – with all its accompanying PR, bonuses for the key players, and photoshoots for the company website – and imagining the job has been done now and no further action is required. Declare victory, and move on to the next project…!

What rarely happens is that the project leader – or even better someone further up the organisation who they report to – does a proper “real life” review of what they’ve delivered and assesses how well it met the original good intention, as an entirely separate exercise from the question “did we get Salesforce implemented on-time and under budget”.

I defy anyone to try to cross that road near that hospital, even as an able-bodied individual, and not realise that the lowered pavements and crossing islands are in entirely the wrong place if you want people to cross the road safely.

In fact, it’s so obvious that it’s also obvious nobody has ever done it, or they’d have ripped up those crossing points and moved them.

Perhaps I’m being a little uncharitable. Maybe they did realise that but, as in a lot of corporate settings, fell prey to the sunk cost fallacy – that is, some version of “we can’t rip those crossings out and start again in a better place because it cost us £50k to build them and we don’t want to waste that money”.

That’s why connecting with the original mission is essential. If the current crossing location is dangerous, and your objective is to get people across the road safely, then ‘fess up to your mistake and get the crossing moved.

If this job is just a tick-box on a KPI sheet that enables you to move onto the next project, promotion in hand, then keep your head down and don’t say or do anything that might make it look like you goofed up.

That’s not just people working for councils.

Your CEO should mystery-shop your call centre once your new CRM has gone live and check that the original objective of improving customer service has been met. They shouldn’t just focus on the internal PR and backslapping. They should check out what it’s like in real life.

Too often, I’ve seen corporate objectives, which have been beautiful as stand-alone pieces of work, make everything worse by the time the original noble objective has been sliced down into specific projects like “implement a new CRM”.

Too often, people have been working in isolation without realising that, hidden behind the 12-foot hedge behind them, is a competitor working on something that will blow their fancy CRM system out the water when it comes to making customers happier.

Next time you implement a project, take a good 360-view all around. Make sure you’re not confusing “spending money” with “solving a problem”.

It’s entirely possible to do one without the other. In both directions.

And ultimately the value to your business is in solving a problem for your customers – it’s not in how you solve it, or in pretending you’ve solved it by implementing a CRM when, in fact, almost nothing has changed in your business except there’s now a thin veneer of expensive tech on top of something that wasn’t working before.

Projects – like lowering pavements or implementing CRMs – are easy to deliver.

Noble objectives – like helping people cross the road safely or making customer service better – are much harder, but so much more worthwhile to your bottom line.

If you have a choice to make, focus on the second option.

Once upon a time, technology improved our lot as humans.

Sure, machine-made shoes weren’t quite as good as shoes hand-made by a master craftsman, but at least now just about everyone could afford shoes.

Technology has improved the quality of our drinking water, saving millions from terrible, life-threatening diseases. Technology made cars safer and aeroplanes more likely to stay up in the sky.

And technology kept the UK safe from invasion in the 1940s – the codebreakers at Bletchley Park and the radar stations along our coastline kept us free when most of Europe succumbed to darkness.

Once upon a time, “technology” was mechanical because there was no other way to do anything. But then digital technology came along.

Early in my career, during society’s first faltering steps in digital technology, I saw transformations in my own world equivalent to those probably experienced by master shoe-makers in Victorian times.

Computers and software took over the world of accounting and made everything cheaper, faster, and better. Month-end took minutes instead of weeks. And the ledgers always balanced.

They weren’t always right in terms of the individual postings, but the total of the debits was always equal to the total of the credits because, within this confined, cosseted, hermetically-sealed digital world, there was no way for it not to be.

Then it gets harder

Whether you’re dealing with mechanical technology or digital technology, it gets progressively harder.

In the early days of computerised accounting, almost anything was an improvement on manual bookkeeping in terms of speed, reliability, and reporting capabilities.

But then a problem common in all technological developments set in…

The Law of Diminishing Returns.

This is just a fancy way of saying that, after a certain point, you get less and less back in return for each incremental investment. And, ultimately, you get back less than it cost you to invest in the first place.

At that point, the only sensible economic decision is to stop investing. When each incremental £1 spent brings in less than £1 in incremental returns, there’s no point persisting.

At least, that’s what happens in theory.

I’ve seen plenty of situations where a business kept investing regardless, yet couldn’t figure out why, despite continuing to invest £millions, they lose more and more money as each month goes by.

There are two main reasons for that:

1 – They’ve been sold on a concept to the exclusion of anything else, including rational thought

Every time I see an organisation talking about being a “digital first” organisation, I know the people running it have jumped the shark. They are so obsessed about making everything in their business digitally-based they have completely forgotten that the job of every business is to put money on the bottom line, not to become slavish, uncritical adherents to the technology equivalent of some TV evangelist.

Government departments are particularly good at doing completely daft things in the name of “digital first”, or some such silly rallying-cry. But that’s because they’re run by politicians who are incapable of rational thought except when it comes to attracting donor funds into their bank accounts.

But plenty of companies, large and small, fall for the charms of some tech evangelist with the sales skills of someone hawking face cream on QVC at 2.30am.

If a tech evangelist can convince you that the answer to everything is “more tech”, you become their meal ticket for life.

No wonder they put so much effort into finding their next mark – the payback to them is enormous.

The payback to you? Often nothing. And, increasingly, it makes everything worse.

You might as well just hand across a suitcase full of fivers and leave everything exactly as it is for all the good your business will experience as a consequence.

That’s often because of this…

2 – Non-existent business cases

There is nothing wrong with the concept of a business case. That’s what every business should be looking for to justify a proposed investment, right?

Except business cases often resemble reality about as closely as slurry down at the sewage farm resembles drinking water.

With machinery it’s a lot simpler: give me £10,000 for this special bit of kit and I’ll increase your hourly throughput by 1,000 units in less than 90 days.

It’s easy to model the impact of those extra 1,000 units, factor in the time-delay until the new system gets up and running, and so on.

You end up with a clear view of whether this proposed project adds any value, and if it does, how much.

And if, like the sensible businessperson I’m sure you are, you’ve done some trial runs as part of the commissioning process to make sure the machine performs as promised before you have to pay for it, you’re pretty safe.

That’s because of a clearly visible reality.

There’s either an extra 1,000 units at the end of the production line an hour later, or there isn’t.

If there is, that justifies the investment. Everybody, including yourself, is happy.

If there isn’t, you’ll tell the supplier to take the machine out and give you a refund.

When we’re dealing with digital technology, that’s not nearly so obvious.

While there’s nearly always a business case, that business case is nearly always garbage.

A typical business case for tech investments

This is slightly unkind for one or two people I’ve come across over the years…but only slightly… 😉

Here’s a typical tech business case, in summary form:

• This report from Gartner (or BCG or KPMG or someone like that) says switching customer services to digital chatbots will save the typical business 20% of their customer service costs.
• In your case, that amounts to £5million a year.
• So give me £1million to make you a chatbot and fire 20% of your call centre operators.
• That way, you get a 5:1 RoI, just in year 1, with gazillions of cash to follow in subsequent years.
• Sign our terms and conditions here and we’ll get started.

That’s not a business case. At my kindest, I might describe it as some sort of existential wish list, compiled by people who should probably get out more.

However, if one of those tech televangelists has already persuaded you that digital technology is always…inevitably…inscrutably the way forward in every conceivable situation, then the likelihood is you are reaching for your chequebook long before the sales rep asked for the sale.

The truth is that, unlike 20 or 30 years ago when using some technology where none had existed previously would almost certainly deliver a positive RoI, nowadays it’s a lot more nuanced.

And the margin for error is a lot smaller than it used to be. Which means the risk of a negative return in reality (whatever the overoptimistic business case said at the outset) is pretty high pretty often.

Of course, if your tech televangelist wants to sell anything, they know they need to come up with some sort of business case. I don’t particularly blame them for wanting to make a sale. The blame lies with people who don’t pause for long enough to challenge the rationale.

That’s almost certain to lead to higher operating costs for your business, even though you run digital project after digital project in the course of executing your “Digital 2030” vision.

Because tech is the future…right? Gartner, or someone, said so.

A coffee shop example

Just in case you think I’m making this up, I visited a coffee shop in London recently which had clearly fallen hook, line and sinker for this digital transformation nonsense.

The coffee shop had pretentions of grandeur and was working hard to recreate the Central Perk vibe, from the coffee shop in Friends.

I’m sure this coffee shop sees itself as a cut above Costa and Starbucks. And I’m guessing this coffee shop is part of a small chain – I’ve never seen one where I live in the north of England but I’ve seen a handful in London.

However, instead of Gunther in Central Perk, customers are greeted by a massive touchscreen ordering system when they walk through the door. Not quite as tacky or as big as those in McDonalds, but along those lines.

I spent some time trying to figure out what menu options my preferred coffee was hidden under and then had a bewildering succession of questions about coupon codes, extra shots, dietary information, and payment details.

This was followed by a section where I had to type my details into this massive touchscreen device in order to get a receipt emailed to me. It was genuinely impossible to get a printout of a VAT receipt while I was on-site – in what could well be a breach of VAT regulations, but that’s not my specialist subject.

Now, I’m sure some tech bro or tech gal sold this giant touchscreen solution to the coffee shop owners as something that would increase efficiency, or some such nonsense.

Yet, in the several minutes it took me to figure out this clunky technology, the two staff members behind the counter were doing absolutely nothing.

Well, nothing beyond chatting to one another and having a giggle about what they got up to the previous evening at least.

I know that’s what the staff are doing at the average Starbucks too, while I’m waiting in the vain hope that someone will break off their conversation and take my order.

But at least in Starbucks they’re not standing there watching me type my order information into a giant touchscreen while they stand by chatting.

At Starbucks I’m just being ignored. At this coffee shop, I’m being humiliated into the bargain.

The numbers make no sense

It so happened that I was in this coffee shop for quite a while as I had two meetings back-to-back. And I saw pretty much the same situation repeat itself throughout the morning.

Two members of staff stood around chatting most of the time, occasionally making a cup of coffee.

Successive visitors struggled with the giant touchscreen, some of them giving up completely and leaving the coffee shop before finishing the ordering process.

Let’s look at the reality of what’s going on here.

The coffee shop has to pay two members of staff regardless – for Lone Worker Regulations reasons, if nothing else. Even though there is only one coffee-making station, so realistically only one member of staff can make coffee at any one time.

I could have spoken my order to one of those people in about 10 seconds and the other staff member could have made my coffee straight away. It’s not like they were doing anything else.

But this chain thought it was a good idea to double the amount of time between when I walked into their coffee shop and the time I got my coffee cup placed into my hand, so they made me spend several minutes messing around with their blasted giant touchscreen.

So, if two humans – two humans whose salaries were already being paid by the business – could have taken my order verbally, and made my coffee straight away, then the investment in those giant touchscreens…together with the barrage of EPOS and stock control modules which ran off the back of them, I’m sure…was a complete waste of time and money.

It didn’t – and couldn’t – make the staff more efficient, because two members of staff were always required, regardless of how much tech was deployed.

A fairly standard till operated by a staff member, instead of chatting and laughing with their colleague, would have given this business all the EPOS and stock control information they needed.

Which means their “putting digital first” investment took money off their bottom line despite some tech evangelist selling them on the idea due to the supposed “extra efficiencies” of going digital.

And that’s just the obvious stuff

As a purely financial, surface level business case, this investment didn’t seem to make any sense.

But here are three other ways this “efficiency investment” might be bad news for their customers. And ultimately themselves:

a) When I…and I suspect most coffee shop customers…have to take longer than necessary to get the result I want (ie a steaming cup of coffee), I’m unlikely to come back any time soon. As it happens, this location was particularly convenient for a business meeting. But there was a Pret a few doors down where I could get the same amount of caffeine in a fraction of the time, and without fiddling around with giant touchscreens for minutes on end.

b) If I was a stalker (which I’m not, to be clear) I could position myself behind anyone keying in their email address to get a receipt and see what they typed in. Now, a high proportion of the people wanting a receipt are likely to want it to claim against business expenses, so it’s fairly likely they’ll enter their work email address. If someone up to no good looks over their shoulder, they now know the person in front of them is Jane-dot-Smith, and she works at Megabank. That’s more than enough information to track this person down.

c) I never actually got my receipt. Why, I don’t know. But now I can’t go back to the coffee shop and ask them to print me another one because they’re incapable of printing out a till receipt. And I can’t get the giant touchscreen to produce one without ordering another coffee, which rather defeats the point. So now I’m down by £4 I can’t claim back – while I’m fortunate that being out of pocket by £4 isn’t the end of the world to me, it is still profoundly irritating. And for some people, I’m sure, would have been extremely bad news.

Time to reflect

So, in summary, this coffee shop has a tech solution which:

• increases costs instead of reducing them, by adding unnecessary tech on top of the staff salaries the business was already paying for
• make no difference to the hourly coffee sales, because only one person could make coffee at a time anyway
• irritates customers through clumsy UX – some of the grumpier ones of which won’t be back in a hurry
• lost customers who couldn’t figure out the giant touchscreen and chose to walk down the road to Pret instead
• can’t produce a receipt for me on-site
• didn’t send me a receipt by email, for reasons unknown, costing me £4
• increases the risks of stalkers and ne’er-do-wells by making customers share personal information in a public place

Put all that together and I’m genuinely struggling to see a positive RoI from a no-doubt substantial investment.

Yet this is true of so much tech nowadays.

If you keep your accounting records manually, there is almost certainly a positive RoI from getting them onto Xero or Sage.

But if you’re already using Xero or Sage, the business case for upgrading to some enterprise grade solution with all manner of reports you’ll probably never use built in almost certainly delivers a negative RoI.

Yet some tech televangelist will set out to convince businesses every day of the week that the increased reporting capabilities alone will pay back the investment they’re asking for.

And every day, around the world, thousands of businesspeople believe them.

If you believe more tech is always the answer and that business cases prepared by suppliers always include all the negatives as well as all the positives, there’s almost certainly disappointment ahead for you.

Although the coffee shop is a fairly trivial example, it’s nonetheless pretty much what every tech solution I’ve seen for a while looks like.

Maybe 10% or 20% of the time there is still a positive RoI for investing in tech. But the odds are increasingly against it.

Next time a tech bro or tech gal comes to tell you about their exciting AI-enhanced robot service capability, start running and don’t stop until you find a good accountant to talk to.

It’s easy to forget that metrics alone tell you very little about what’s happening in your business. So little, in fact, that I’m surprised so many people are quite so obsessed with them.

Please note: I’m not saying you don’t need any metrics at all, just that most businesses could be run with a fraction of the metrics they collect at the moment, and almost certainly don’t need the cottage industry in management reporting that sustains a fair part of the overhead costs in the P&L.

At best, most metrics give you a surface indication of what’s going on. They’re a comfort blanket of sorts…providing cover for people to justify their existence, mostly, without necessarily moving the business forward.

You see, once someone convinces you that the management fad of the day is vitally important for the future success of your business, they’ve effectively also sold you on the need for a department full of people managing whatever that thing is, a daily/weekly/monthly reporting cadence for that thing, a slot at every board meeting to talk about that thing (leading, they hope, to a place on the board for themselves in due course), and a pretty secure job for themselves.

After all, you couldn’t stop doing something that was so vital to the company’s future well-being could you?

Now, lest you think I’m a grumpy old Hector complaining about “young folks nowadays”, that doesn’t mean that I think all modern management fads are entirely without merit.

Mostly, there’s at least some point to them. And I, for one, would like to think I left the world a better place than I found it, so I have no problem at all with most of the things businesses are expected to do these days.

It’s turning these noble-enough objectives into metrics I’ve got more of a problem with. Because then the activity – however worthwhile it may be – turns into a process of managing the metrics, not a process of delivering the outcome which the process is supposed to deliver.

That might sound a little convoluted, so let me explain.

Many business processes are terrible

Firstly, and perhaps most obviously, many business processes are terrible.

They’re often badly designed, customer experience and user experience are generally woeful, they’re usually inflexible, and they arrogantly assume your customers have all the time in the world to interact with some unholy combination of your website’s FAQ page and some soulless, AI-powered chatbot.

And that’s just the good bits.

Business processes are also often under-resourced, poorly integrated with a company’s wider systems, and unsympathetic to anything other than pre-determined, pre-defined scenarios. The minute anything happens that doesn’t fit neatly into a box on a process chart somewhere, the system grinds to a halt because nobody knows what to do.

If you think I’m being a little unfair, I used to deliver business process re-engineering programmes.

All of these things happen on a regular basis, and every time you find one of those conditions, it means your business costs are much higher than they need to be – there’s no cheaper way to run a business than to “get it right first time” and resource your activities properly. (And before you think it, no AI doesn’t help that at all. It just makes it cheaper to deliver the existing terrible service.)

But here’s the bigger problem

Terrible though many business processes are, you create an even bigger problem when you overlay whatever’s going on with a set of metrics, and a regular reporting cadence.

Then, the activity becomes all about the metrics, almost to the exclusion of the original objective.

This is even worse in the age of AI because it has effectively become free for people to game their metrics. A random person in your company might be no closer to achieving the company’s objectives, but they keep their job because their monthly RAG-rated report is all in green territory.

Gaming the metrics without impacting the outcome is, by definition, a complete waste of time and money. And, to be fair to the tech bros and gals, this went on long before AI was invented. AI has just turbocharged the pointlessness of it all.

Let’s take one everyday business example to illustrate.

You are no doubt familiar with the old sales and marketing mantra that you need seven touchpoints with a potential customer before you make a sale.

Let’s skip over the fact that this is nonsense – there is no magic in the number seven, any more than there is in 3, 5 or 12.

It’s very likely to be “more than once”, unless your business is an extremely well-known brand, or you’ve had a personal recommendation from a close family member into the decision-maker.

But enough articles have been written about seven being the magic number…enough motivational speakers have quoted that statistic…and enough sales and marketing textbooks include a reference to this particular “golden rule” that pretty much everyone believes it now.

And, as I said at the start of this article, there is some underlying merit to this principle. The answer is almost certainly “more than once”. But plenty of sales are made on the 8th, 10th, or 42nd touchpoints too.

It’s the distilling of a reasonable enough principle of “more than once” to “exactly seven” that I have a problem with.

However, since everybody now believes the magic number is seven, I can now set up all my sales and marketing processes to hit those magic seven touchpoints. If you’re my boss, you’re unlikely to challenge the conventional wisdom when I tell you I need the resources for seven touchpoints, because everyone knows that’s the magic number, right…?

Spare my inbox

So now we have all the ingredients in place:

• a terrible process to reach the magic number of seven touchpoints, by hell or high water
• a metric we can track (is it more or less than seven, at the time of writing this month’s report?)
• and a system we can game to make it look like we’re indispensable to the business.

You’ll note something subtle has happened here.

The only real objective of a sales process is to make a sale. Everything else, no matter how elegantly it’s performed, is just window-dressing.

However, my objective now is to engineer seven touchpoints. It’s not to make a sale.

This is especially true if I’m in the Seven Touchpoints Department and some other department has to make the sales.

Then I’m sitting pretty even if we never sell a thing because I’ve held up my end of the bargain: “Hey, check my metrics – I hit the seven touchpoints. It’s not my fault the sales department can’t do their job properly.”

However it’s a great protective mechanism even if you, or your department, is responsible for both making a sale and achieving the seven touchpoints. That’s because I’ve persuaded you to believe in the metrics, and switched your attention away from the outcome you wanted…at least most of the time.

Nowhere is this phenomenon more obvious than my email inbox at the moment.

The amount of AI-generated garbage sales messages which end up in there is beyond a joke – they’re poorly targeted, inelegantly delivered, and terribly written.

Yet I can guarantee you that someone somewhere is counting every one of those as one of their seven touchpoints.

The problem with that theory is that, at least in the old days, the concept behind the seven touchpoints was that you had to do seven different things, not the same thing seven times over.

At some level, I get the need for a degree of persistence in making a sale. That’s true when humans try to make a sale and it’s true when our robot overlords try to make a sale too.

But persistence alone rarely makes a sale. More often, what persistence results in is a stiffening of my resolve never to buy anything from your business for as long as I live.

Last time I checked, cheesing off all your potential customers wasn’t a great way of trying to build a business, but hey-ho, no tech bro or tech gal seems to have worked that out yet, so the daily torrent of garbage continues for now.

It’s clearly news to those responsible, but I’m not likely to buy anything from people who irritate me. There is no shortage of arrangers of business finance and utility brokers in the world – if I ever need one of those, it won’t be hard to track down someone who hasn’t irritated me intensely up to that point by sending me a never-ending flood of clumsy sales emails first.

The metrics that matter

Metrics like the seven touchpoints, or the number of daily emails sent, are largely pointless.

I get it that if you send zero sales email, you’re unlikely to make a sale from an email. But if you’ve sent a thousand emails and I still haven’t responded, the likelihood of me responding on the 1,001st is as near to zero as makes no difference.

So the benefit of tracking a metric like “emails sends” is also pretty much zero.

The metrics you should track are the activities or events which indicate you’re moving closer to your end goal – which, remember, is making a sale, not sending out seven identical emails.

And to do that effectively, you’re by and large looking for information external to your business – or, at the very least, external to the process you’re running here – which indicates a changed state at the customer end of the equation.

1,000 emails I don’t respond to means nothing. Except the fact that I almost certainly will never buy from your business, of course.

A single email – whether that’s the first, the seventh or some other number – that I click the “book a demo” button on? Now there’s a changed state.

There’s engagement. There’s an indication that someone is moving down the decision-making process. There’s an early indicator that a potential sale might be in play.

The changed state, ideally from outside your business, or at least outwith the process, is important because that’s much harder to game than just sending out seven identical emails written by AI.

It’s not impossible to game, but it’s a lot harder to game.

And by the time you’ve strung two of three of those together, you can be pretty sure that you’ve got a genuine prospect on your hands.

If the demo leads to an in-person sales call, which leads to your prospect attending an event hosted by your company, you’re way past the opportunity for gaming a metric. That’s almost certainly a real sales opportunity, which you should have a decent chance of converting, because your potential customer wouldn’t have wasted that much of their time in an activity they had no interest in.

So the metrics which are most helpful to track, and the hardest to game, are the state changes from outside your process, not the activity taking place inside it.

But proceed with caution

In the early stages of a process like this, gaming the metrics is still possible. It’s only later on, when your prospect has invested significant time and effort from their side, that it’s almost impossible to game, unless your sales manager has 150 close relatives.

You can, for example, create fake engagement with a sales email.

You can almost certainly do this with some dodgy software, although that’s not something I have any knowledge of.

But you can also do it by putting things into your barrage of emails to encourage people to take some action.

My favourite of the moment is “Reply ‘no’ and I’ll stop sending you emails”

I never reply “no” because the minute I do, the AI bot on the other end knows my email address is real and active. All that’s going to happen here is someone will book my reply as “engagement” against their engagement metric, and the AI is going to get cranked up to 11 because it has convinced itself that I’m a real prospect because I’ve replied.

One day I might do that just to see what happens because they’ll almost certainly ignore me, which means I’ll have a case to take to the ICO, but frankly I’ve got better things to do with my time.

So, until then, I’ll just keep ignoring their emails, and mentally ratchet up their position on the list of organisations I’m never going to buy anything from instead.

If “engagement” is only defined as a reply to an email or a click on a link and nothing else happens from the customer end, that’s not really engagement at all. Someone might have hit reply by accident, or you might have caught them at a weak moment.

Movement is the key from the point of initial engagement onwards. Is your prospect going further down the sales funnel or are they just stuck at the second level without any signs of them ever making progress in the direction of an eventual sale?

Timescales can be quite helpful here.

If a prospect took an action, even if, in theory, it was moving them closer to a sale (eg by clicking a link in one of your emails) but they haven’t done whatever the next thing in your process is in the next 30 days, they need to come out your “Level 2” prospect list and go back to being a “Level 1” prospect.

Of course, it depends a bit on your business and your sales cycle, so 30 days isn’t a hard and fast rule. But you need to define a timescale which forces the sales team to recognise that they need to start from the beginning again. They can’t just carry forward a metric to justify how busy they are if it now looks like a genuine prospect has dropped out the running for some reason.

I’ve spent too many years being told by sales directors that their extensive list of Level 2 prospects are “going to buy any day now” that long ago I stopped regarding metrics like that as very helpful. It’s movement through a process I’m looking for, not how many Level 2 prospects you had on the books at the end of last month.

It might well be interesting enough to know, but the predictive value of knowing the number of Level 2 prospects isn’t nearly as high as knowing that one prospect, in the last 30 days, has downloaded a fact-sheet, met in-person with a sales manager, and is attending one of our sponsored events next week.

Movement is the key. And that’s hard to game – especially beyond the initial engagement – because very few people have the time to waste meeting salespeople to talk about products they have no intention of buying.

It’s not just sales

Although I’ve used making a sale as an example above, the same principles apply to every department.

Every single department in your business is likely to be able to game whatever internal metrics you give them, so they are often of questionable value – even though you’re likely to be paying a group of expensive people to manage them, track them, and report on them.

One example I came across recently was an HR Department trumpeting their success in health and safety because everyone in the company had attended the compulsory company-wide health and safety training.

I don’t know about you, but no matter what I thought about health and safety training, if the HR Department told me I’d be on a disciplinary if I didn’t attend the training, I’d make sure I attended the training, even if only under sufferance.

Would I necessarily remember what the trainer told me, or act on whatever recommendations they shared at the end of the session?

Well, that’s a different matter. Knowing that 100% of the company attended the training is interesting as far as it goes, but it’s likely to be a less-than-perfect indicator of whether there will be fewer accidents at work in the future than there have been in the past.

That’s because this is an internal metric, based entirely within the process itself (ie “threaten everyone with a disciplinary if they don’t attend”). It’s been gamed by the HR Department to claim a victory against their metrics, but there is no evidence of a change of state from outside the system at all.

To be fair to that HR Department, there are some legal benefits from putting everyone through “sheep dip” training like this in the event of an accident in the future. We did everything we could, the Head of HR can tell the Health and Safety Executive Inspector after the factory roof gets blown off in an explosion.

But what you really want is fewer accidents at work, more people wearing their safety boots, nobody obscuring the warning signs in the factory with random pallets of spare parts, or whatever.

It’s entirely possible to have compulsory company-wide training which makes no difference at all to any of those states, all of which would make accidents at work less likely in the future.

When you design metrics and reporting systems, counting “steady state” situations – such as the number of Level 2 prospects you have or the number of people who attended the compulsory health and safety training – is of extremely limited benefit.

Nearly always, all those metrics do is give a get-out clause to someone who can then say, “I did everything I could – look, I hit my target of getting 100% of the staff to attend a compulsory training event”.

Track the metrics from outside the system instead, especially those which indicate a change of state which are, by definition, much harder to game.

Then you might have a set of metrics you can truly run your business on.

Managing metrics in any organisation is a lot more complicated than it used to be.

At the start of my career, you were lucky to get weekly or monthly stats for most things. Now daily, real-time, and click-by-click updates are everywhere.

Trouble is, a lot of the additional data that has come our way in the intervening years is irrelevant, or at the very least unhelpful in the timeframe in which it’s presented.

If a salesperson has a target of £10,000 a month, it’s 9.30am on the first working day of the month, and your salesperson hasn’t made a sale yet, does knowing that give you any clearer idea of how that month is likely to go for them than you had before?

Well, it depends on your business model, but almost certainly not.

Yet many businesses invest six figures every year to track information like that, even though it won’t make the blindest bit of difference to the way you run your business. In no time, whether you like it or not, your inbox and notifications are being flooded with real-time updates.

Along the way, someone clearly thought this is a good idea, often at the prompting of a sharp-suited IT systems salesperson in my experience, but it rarely is.

Knowing that information is unlikely to make any difference to what the salesperson is going to do in the next half-hour, and it’s unlikely to make any difference what the 17 other people who get the real-time stats are going to do either. That six figure investment was probably a monumental waste of money.

At least, at that point in the process…

Obviously if the same salesperson gets to the end of the month, it’s half an hour away from close of business on the last working day, and they still haven’t sold anything…now we have a different problem.

But even there…in that moment…is anyone who is privy to that information likely to do anything different between 4.30 and 5pm on the last working day of the month than they would have done anyway?

I doubt it.

Between those two extremes, is there a crossover point when it isn’t too early to take action, while not being too late to do anything about a terrible month’s sales results, if left unchecked?

A point at which some focused effort from the salesperson and/or their manager might turn this month’s results around…or at least reduce the shortfall against their annual target which will be carried forward into next month?

Of course there is.

At that point, information becomes useful.

Before that, it’s more of a distraction than anything else. It then remains useful for a while, before not being terribly helpful again because the salesperson is running out of time to turn this months’ results around, almost no matter what they do.

Is it actionable?

In my days as a CFO, I refused to circulate information that wasn’t actionable. I’m no fonder of bucketloads of junk I never have time to look at piling up in my inbox than anyone else, although I would concede my professional has a reputation for sending bucketloads of impenetrable reports around whenever possible. (For some people I’ve worked with, that reputation is entirely justified.)

There is a temptation for people who revel in data to circulate as much of that as they can find. But that’s rarely helpful to anyone.

The costs of compiling data tables, charts, graphs, and whatever else constitutes an organisation’s information flow is considerable. So employing people to produce reports nobody looks at – or even if they look at them, they can’t take any meaningful action based on what they see – seems more than a little pointless.

I’d prioritised making reports actionable for a while before I heard the term “signal vs noise”. I first learned about it in the context of the financial markets, but I later learned it pops up in other arenas too.

In financial markets, though, the “signal vs noise” question boils down to this: “can I make a decision to trade based on the information I’ve just been given”.

If you can’t, then it’s noise…just the markets bouncing around randomly, doing what they always do.

If you can, it’s a signal. Time to place that trade.

Sounds simple enough, I know. But most organisations favour circulating a torrent of data at every opportunity – and spending the GDP of a small country to do it – even though, most of the time, nobody is going to do anything different as a result of receiving that information.

When IT suppliers tell me they can give me real time updates of every metric imaginable, they think this is a major selling point.

For me it’s a sign that nobody has thought clearly enough about what information they want from a system, so they’ve defaulted to sending everything to everyone as often as possible, no matter how irrelevant and non-actionable it may be.

Natural variation

One of the problems with expensively collected and distributed real time data is that it assumes every minute of every day is no different to any other minute of the day, when that’s patently untrue.

It might be different if you’re a huge multinational operating across multiple time zones, or you run an online ecommerce operation, but for most businesses there will be no sales activity between 5pm one day and 9am the following morning. For that period of time, the availability of real time information isn’t a selling point.

Or during the day someone might take an hour off to visit the dentist, during which they don’t make any sales. Yet you already knew they’d gone to the dentist so the real-time data system flashing red because Janet hasn’t sold anything since 2pm is, at the very most, an unhelpful distraction.

Some days of the week might normally be stronger than others.

Some weeks of the month might be better or worse than other weeks.

And sometimes, people are just having a bad day. Tracking their minute by minute activity is almost certainly a waste of everyone’s time.

If your end-to-end sales process involves making outbound calls to prospects with the objective of booking them in for a product demonstration and your average hit rate is 1 in 10, that doesn’t mean every time you make 10 calls, one of them is a demonstration booking.

The laws of statistics mean that if you make enough calls for long enough, your hit rate will average out at 1 in 10. You might conceivably make 27 calls in a row without booking a demo, but calls 28, 29, and 30 all book a demo, averaging you out at your KPI of 1 in 10.

But statistics only works with large numbers, not small numbers.

So if that target is 10 calls an hour, you’ll know in a day or two at most how your salesperson is performing.

But it that target is 10 calls a month, you might conceivably need to track performance for three or four months before you can take a view on their performance. Getting to the end of the month without a single demo booked means virtually nothing.

Much as providers of management information systems would like you to believe otherwise, a fairly high proportion of the torrent of real time information pouring off their systems is really not much use.

And if it’s not much use, why are you collecting it, much less disseminating it around the business to distract people from the jobs they should be doing instead, which might put some more cash on your bottom line?

Your business model

Much of this goes back to your business model.

If you “hard sell” low-ticket items in volume, your data needs are very different from, say, a capital goods manufacturer who sells 30-40 industrial machines in the course of a year.

Your sales cycle is a good guide for what your information needs should be.

For selling low-ticket items in volume, a daily reporting cadence is likely to be about right, and you can use the laws of statistics to work out unusual patterns or salespeople who seem to be stuck in a long, inexorable slide in their daily numbers.

If you sell three or four high-ticket items a month, a monthly or quarterly reporting cadence is more likely to be appropriate. And the laws of statistics are unlikely to be much help because there just isn’t enough data to make statistics work for you.

While some reporting is always helpful, that doesn’t mean all reporting is helpful.

An area which is often missed are the leading indicators, which in turn are based on your business model.

For low-ticket, high volume sales it doesn’t matter nearly so much because your sales cycle is likely to be registered in no more than a couple of minutes. You just sell as hard as you can and check your daily numbers.

But for high-ticket, less frequent, sales the actual sale itself is not all that relevant most of the time, because a sale is a rare occurrence under that business model.

However you are probably prospecting on a regular basis. You’re having initial in-person meetings with clients. You spend a lot of time with them on diagnostics and systems specifications.

Even then, a real-time data tracker isn’t going to tell you much here. But you might be surprised how accurate a forward sales forecast you can make just by knowing how many systems specifications meetings your salesperson has had this month.

If, on a fairly reliable basis, a systems specification meeting today turns into a delivery of some shiny new equipment to a customer three months from today, now you’ve got some useful information.

And while you still won’t need real-time data tracking given that an in-person sales meeting in that depth is unlikely to happen more than a couple of times a day, the flow of systems specification meetings becomes much more helpful information than sales data.

Of course, your accounts team will report sales data in the monthly accounts, but the sales data will be “lumpy” and some months you might not have any sales at all.

But given that you will have some sort of conversion rate from systems spec through to actual sale, even if you do that at a pretty high 1-in-2 or 1-in-3 conversion rate, you now have twice or three times the information you had before about what future sale are likely to be.

Don’t panic

Part of the problem with reports – especially now there’s so much software around which can spit out graphs at the touch of a button – is that there’s often a temptation to panic when performance isn’t in line with some notional average or a monthly target figure.

That’s usually when a whole raft of sub-optimal decisions get made.

When you see an average number or a target shown as a straight line on a chart, with an actual number plotted and a red “fill” between those lines if performance is below target and a green fill if it’s above target, the temptation is to panic when you’re in “red” territory.

While occasionally panic is an entirely appropriate reaction, most of the time, it’s just that the timescale is off.

If you make three sales a month and haven’t sold anything by lunchtime on the last working day of the month, don’t discount hitting this month’s sales target entirely, even though you’ve spent most of the month so far in “red ink” territory.

And, provided you’ve been tracking the leading indicators appropriately, even if you end the month with zero sales, it’s highly likely that the three sales from “last month” will come in during the first couple of working days of the following month, and you’ll still have a whole month to make three more sales before 5pm on the 31st rolls around to keep your long-term run rate intact.

If you try to manage a long sales-cycle business on short-cycle data flows, you’ll almost certainly make bad decisions – you just need to hold your nerve sometimes.

Equally if you try to manage a short sales-cycle business using just long sales-cycle data, things can easily have gone completely off the rails before you know anything about it. That’s not a good outcome either.

So when it comes to data and reporting, it’s worth checking two things:

1- Does the reporting cadence make sense in the context of your sales cycle

2- Is the information being circulated actionable?

Anything over and above that is likely to be unhelpful at best, not to mention expensive to compile and distribute.

When a business is going through hard times, there’s a temptation to think that you need more data, more information, more reports, so you can work out what’s going on.

Often the answer is that you need less data, less information, and fewer reports.

When there is too much “noise” in your reporting – either because of a timescale mismatch or because you’re sending round a never-ending torrent of mostly irrelevant, non-actionable information – then odds are you’ll miss most of the “signals”.

It’s easy to develop some sort of number-blindness and miss most of the key insights you need to take action in your business.

Next time a report turns up in your inbox, ask yourself whether it’s helpful in the context of your business cycle and whether it’s actionable.

If it’s neither of those things, seriously consider switching that report off.

At the very least you’ll be giving people time to manage the activities in your business that really matter, instead of spending their time battling against a never-ending fire hose of mostly irrelevant data.

You never know. They might spend their time doing something more productive instead.

If you run a business, of course you want to run it at the lowest possible cost relative to the income you receive. That way the difference between the two – your profits – is as high as possible.

As an objective, that’s fair enough. But you’ve got to know what you’re doing because it isn’t as simple as it sounds.

That’s because too many people focus on just one element of the picture and ignore their real purpose.

You see, the objective of any business is not to reduce their costs as low as possible.

It’s to make as much profit as possible.

They sound like the same thing, but they’re not. There’s a false equivalence at work here.

So if you want to know how to put as much profit as possible on your bottom line, keep reading. I’ll share some of the common misconceptions and show you a better way of getting the results you want.

Cheap

I guess we’ve all worked for cheapskates at one time or another. I certainly have.

But let me ask you this – how come none of the cheapskates you worked for have built a multi-billion dollar business?

Sometimes you find cheapskates running multi-billion dollar businesses once they get to that size. But it’s rarely how someone builds a multi-billion dollar business.

Once you have a multi-billion dollar business, there can be an argument for chasing down the efficiencies that open up due to economies of scale kicking in, or volume discounts for buying larger amounts of goods and services. But that’s very different from building a business through being a cheapskate.

There are a couple of reasons for this.

1 – Your customers

Ask your customers if they want cheaper prices or not, and they’re likely to say yes.

However, unless you’re selling to cheapskates – which, by and large, is a terrible economic model – that’s not what they really want. What they want is good value, not necessarily the lowest price.

Putting any other consideration aside, though, training your customers to always buy the cheapest isn’t all that smart, because one day the cheapest provider won’t be you. But if you’ve been trumpeting about how cheap you are, all you’ve really done is lay the groundwork for someone else to sweep in to undercut you.

Focusing purely on reducing your costs, and passing on those savings to your customers to win their business, also limits you to the 10-20% of any market who are dyed-in-the-wool cheapskates who will always buy the cheapest, no matter what.

The other 80%+ of the market won’t come near you with a bargepole.

And sure, some people cycle into being cheapskates and cycle back out again so there’s churn which can give the impression of more people buying from your business. But over time, you’re limiting your target market if being the cheapest is all you’re trying to do.

That’s because, once you’ve been around for a while, you get tired of buying cheap things that break and trade up-market as and when you can afford it.

And customers can smell a cheap operator out dead easy.

In my career, I’ve found that any firm which has a reception area about as welcoming as the visiting room at a maximum security prison is almost certainly cutting corners in their production in order to be the cheapest, without thinking that I might want something else as well, like product quality, longevity, or reliable after-sales service.

To confirm my opinion, I usually ask to visit the gents. If that also looks like what you find in a maximum security prison, I’m very unlikely to buy from you. If you treat your staff that badly, it’s too a big stretch for me to believe that you’re likely to look after me and my business any better.

Sending out messages like “we’re cheap as chips” to your customers – either explicitly in your marketing or implicitly in the state of your factory toilets – is something only a minority of customers want. And even those are fickle – off like a shot if they can find someone to do something similar for a penny cheaper.

2 – Your bottom line

There’s an old saying “buy cheap, buy twice”. There’s usually nothing more expensive than buying cheaply, and sooner or later, most people work that out for themselves.

Rather than buying a quality product that last 5 years, some people buy a product at half the price that stops working the minute the 12-month guarantee period runs out. So you need to buy another one, and so on.

By “buying cheap” at the start you’ve spent 2-and-a-half times more over that 5 year period than you would have spent by purchasing the higher quality product.

As an aside, this is one reason government spending is so wasteful. It’s not actually because they’re deliberately wasting money (at least not most of the time). It’s because they’re spending 2.5x the amount of money they need to spend over 5 years because their only purchasing decision has been “who’s the cheapest?”

Yet, many businesses fall into the same trap, falsely equating “low price” with “good value” when it’s often the exact opposite.

That’s why every cheapskate business I’ve come across has to pedal twice as hard to keep the show on the road as other businesses in the same sector. They’re always the people who pay their VAT late and worry about making payroll this week.

It takes a lot of time, nervous energy, and (ironically) money to run a cheap business, even though purveyors of more simplistic business strategies would have you think otherwise.

Even if the product you sell is nominally cheaper per unit to produce, you need a bigger complaints handling team because your low-quality products break more often, you’re probably sending out more rush order replacements for products which don’t work as intended because corners were cut in the manufacturing process, and your accounts team is larger than it needs to be because of all the credits and reinvoicing they have to do.

The hidden costs of being cheap are considerable.

Cheaper

If you find a thoughtful analyst or two…or have a (ahem!) superstar CFO…you can work out the areas where being cheap is costing you money and take some different decisions.

That probably won’t give you all the upside, but at least it will stop the downside leakage for your bottom line of having to express-ship replacement products which broke in transit due to someone deciding to save 3p on the bubble wrap which used to protect your products inside their shipping boxes.

For the upside, though, you need insightful managers who can join the dots in a way that most managers can’t.

Most managers have a very narrow focus on their metrics and don’t much care what happens as long as they hit their sales targets or their production quotas.

At some level this is understandable, but let’s face it – your business runs on bottom line profits and cash flow. Whether or not the operations director has met their production quota is an irrelevance.

Tractor factories in Soviet Russia always met their production quotas and their economy still collapsed.

However you, as the leader, need to be comfortable with the trade-offs required to make this work.

If you continually hammer your production director for not meeting their quota, when the reason is that they had to stop the machines and make urgent repairs to save the next batch being made for your biggest customer being returned as sub-standard, then don’t expect them to manage the bottom line for you. They’ll focus on their quota to the exclusion of everything else, including your bottom line.

Some people take to this style of management better than others. By and large, people from a large company “managing by the numbers” background find this difficult, even though being able to make intelligent trade-offs is one of the most important ways someone in a management role can add value to the business.

While they won’t always make the right calls, if the company mindset is that you expect managers to make intelligent trade-offs – or at least trade-offs that appeared smart and thoughtful at the time the judgement was made, irrespective of whether or not it ultimately turned out as intended – then your wins will far outpace your losses over time.

Your managers will make “best value” decisions, not “lowest cost” decisions.

Your customers will probably pay more for better quality and more reliable products.

You won’t be funding the cost of failure any more (eg returned products and customer service complaints) – those savings flow straight to the bottom line, outpacing any additional costs you incur usually.

There is an art to this though. In the same way as buying something cheap can be a very expensive decision, so can buying something expensive, if it’s only really a shoddy product with a fancy price tag.

And occasionally the increased cost isn’t worth it. If a product lasts 10% longer than others in its industry, but costs twice as much, all things being equal, that isn’t a good value decision.

That’s why you need smart people who can make the trade-offs necessary to add to the bottom line, not just plough their own furrow to the exclusion of any other consideration…even if that isn’t in the company’s best interests.

And it’s also why you need to support those smart decisions, even the ones that don’t work out (as long as they were smart at the time the decision was made) or people will drift back to just looking after their own furrow and not come out again for a long time.

Cheapest

While the cheaper/best value strategy is better for your bottom line than the cheap/lowest cost, there’s another way of running your business which is often even better.

That’s because in the “cheaper” strategy nobody in the business, apart from the managers, is doing anything different to the “cheap” strategy. If I’m running a machine or making sales calls from the call centre, I’m just doing whatever I was doing before. It’s just that, now and again, my manager tells me to start doing this or stop doing that.

But that usually comes with a significant management cost.

Now, when this is done well, the extra management cost saves the organisation more than the cost of employing the managers, so there is plenty of upside for the business. But that’s not always the case, so you need to remain vigilant.

There is another way to run your business, though. When this works well, it’s the cheapest way of all to run your business, but it does require you to employ high-calibre people – not necessarily outrageously expensive people, just people to the middle-to-top end of the market rate salary bracket for the job your hiring for.

Here’s what you need to do:

1 – Structure = cost

Every time you see a management structure, you need to see cost. While the focus in most businesses is on line-worker productivity, you need to think about your management team in the same way.

It’s not a cast-iron rule, but I’ve seen a lot of businesses which could operate with half the managers they have and be no worse off than they are today, pocketing the saving in extra cash on their bottom line along the way.

However businesses think that when they get to a certain size, they need to employ an HR Manager or a Quality Assurance Manager or a Finance Director.

There are times when all those decisions can be good decisions, but they can also be bad decisions. One of my proudest moments as a CFO advising a growing business was talking them out of hiring an HR Manager for their 10-person start-up and hiring another salesperson instead, at a higher salary than they were prepared to pay for an HR Manager.

Now, these were lovely people, and their hearts were in the right place. They’d read all those articles in business magazines about the importance of people development in any successful business and thought they should do the same “because of the amount of time we spend on people”.

The reality was they just needed to get rid of a particularly difficult member of staff and “the amount of time we spend on people stuff” reduced to almost nothing in just a couple of weeks.

When you think about bringing in more management resources, you need to ask yourself if you’re just papering over a problem – in this case employing someone to spend their working day having someone moan at them constantly, instead of the bosses having to do it – or if you’re really taking the business forward.

In this case the additional cost of the additional management structure was taking away from the bottom line, not adding to it.

That’s because management structure equals cost – unless you can see an RoI on that cost, you’re probably better off not employing someone in the first place.

2 – Process = cost

In the same way as management structures increase costs, so do business processes.

Now, I know what you’re probably thinking – but we implement business processes for increased visibility, transparency, and efficiency.

And that’s what people who obsess about business process management will tell you.

Sometimes it’s true, but more often it isn’t.

What you actually do every time you implement a business process is that you set a “floor price” that whatever you’re doing can’t fall through.

Which is bizarre, because you’re trying to add to your bottom line, so the last thing you want to do is set a floor price which ensures you can, beyond a point, never do an activity at a lower price than you do now.

When I ran a 1,000 person call centre operation, we discovered that when we asked all the questions we needed from a caller in a certain structured process, calls took significantly longer than when we just let the caller talk in any sequence they wanted and just noted down what they said in the relevant part of the online form the call centre agent filled in.

With a structured process, calls took about 3 minutes.

When customers gave us the information in the order which suited them best, calls were often less than half that amount of time. (Full disclosure: sometimes calls were longer too, but they were much rarer than the shorter calls, which meant we were net winners overall.)

If you want to run a business at the lowest possible cost, you might need to give up some of the processes you currently use as they are effectively “inking in” a minimum level of cost you will never be able to go below.

3 – Decisions = cost

Every time something has to go to another person for a decision, you’re building in cost.

At the very least, there’s the time your staff member spends explaining the issues to whoever needs to make the decision. Sometimes there’s some negotiation, a bit of to-ing and fro-ing as well, some additional information required, and so on. All of which increases the time spent, and therefore the cost, of that decision.

There’s another cost too. If your customer is waiting an extended period of time for a decision, the likelihood is they’ll probably shop elsewhere next time they need whatever you’re selling.

Life is too short for someone to wait 48 hours to find out if they can have something you sell in blue instead of green.

So you want as few touchpoints as possible beyond the first person who encounters an issue in your business. You need to give your people some leeway to make decisions so they don’t need to refer on to someone else to get an answer.

That’s especially true when the answer is obvious or largely predetermined.

Back in my days running a call centre, we did a study and found out that (based on their salary costs) if we let a call centre agent give a customer an answer that cost us about 50p. If they referred the decision to their manager, that cost £5. And if the manager referred it to a director that cost £50.

It might not surprise you to learn that the vast majority of the time, the decision a director took to rubber stamp something was the same “obvious” or “predetermined” decision a call centre agent could have given. We just spent £50 making that decision instead of 50p.

I don’t know about you, but spending 100x the cost to get to the same answer doesn’t immediately sound like the best strategy for building the bottom line of any business.

So we gave call centre agents much wider parameters for making decisions on the spot which saved up the majority of the extra £5s and £50s we had been spending previously.

The parameters are key, of course. We didn’t want a call centre agent committing the business to a £1million refurbishment of a customer’s warehouse just because one of our truck drivers had scuffed some brickwork while reversing into the customer’s loading dock.

However, could the call centre agent process a refund because the goods hadn’t turned up as promised without referring that decision up the line? Of course – what was the director going to do, tell the call centre agent that Mrs Smith was lying about the late delivery even though they had never met or spoken to Mrs Smith?

And did we have a few Mrs Smiths who called up a little too often to complain about a late delivery in the hope of getting a refund. Of course we did, but when the call centre agent fired up the customer record, anyone who had a history of multiple refunds was quizzed much more closely than someone who previously had a “zero refund” customer record.

In either scenario, we relied on the call centre agent’s judgement, using their 1:1 conversation with the customer and their customer record to guide their decision. However no better decision was likely to be taken if the manager (£5) took it or the director (£50) took it, instead of the call centre agent (50p) taking it.

If you put your mind to it, there are a remarkably large number of activities in your business that don’t need expensive organisational structures, rigid processes, or drawn-out decision-making criteria.

Every single one of those adds cost to your business.

Throw together a penchant for always buying the cheapest, irrespective of quality, and thinking that an increase in management, rigid processes, and complex decision-making criteria will always have a positive RoI, I’m here to tell you that’s almost never the case.

Control freaks can’t run businesses with a minimum of management, processes, and decision-making, but you need to ask yourself – would you rather be a control freak or would you rather run a highly profitable business?

The odds of anyone doing both of those at the same time are vanishingly small.

The choice is yours.

Just in case you needed proof that accounting can tell you most things you need to know about your business, today we’re having a look at a management accounting concept which – slightly adapted – can be a tremendous help in accelerating your growth as a business.

But before we get into the exciting management accounting concepts…I know you can hardly wait…let me ask you a question.

All things being equal, which would you rather have: 10 jobs each of which was 10% complete, or 1 job 100% complete and 9 jobs 0% complete?

In most organisations, the answer is the first one.

Or at least if you look at what they actually do, rather than what they say, it’s the first one.

In every organisation there are people pootling away on activities of one sort or another which might not be entirely without merit, but which, at that point in time, make very little difference to the future of the organisation.

Let me illustrate: if I spend my time today writing up a revised expense claim policy, I might be busy enough. But when did you last work in an organisation where the lack of an updated expense claim policy was the biggest problem that stopped the organisation reaching its goals?

Probably never. But I bet you’ve sat in lots of meetings about activities like this before now.

Time ebbs away regardless, but the truth is whether you update your expense claim policy today, tomorrow, or a year from now, your business is unlikely to succeed or fail purely based on the state of your expense claim policy.

However by the end of the day, you might have a 10% completed project. Alongside a range of other 10% completed projects.

The likelihood of all those projects being equally valuable to your business is pretty much zero.

Yet, by the end of the day, they’re all 10% complete, with completion dates staggered out over the next few months depending on when the board gave you a deadline for.

The exciting bit of management accounting

Given that backdrop, management accounting has a helpful perspective to offer.

Fear not, I’m not going to go too deeply into the technicalities. I just need to introduce you to a concept called “the limiting factor of production”.

This is a really important concept in management accounting because your costing system should be designed to maximise the output from whatever the limiting factor of production is. (By the way, exactly the same principles apply in the service sector, I’m just using a manufacturing example here because most people find that easier to visualise.)

Let me illustrate.

In a factory, there are three machines. To produce our products, we need to take the raw materials through each machine in sequence.

Machine A has the capacity of 10,000 units an hour. Machine B can handle 5,000 units an hour. And Machine C has an 8,000 units an hour capacity.

What this means for costing purposes is that you need to base your cost models and pricing on a maximum output of 5,000 units an hour, because that’s the fastest that your limiting factor of production (Machine B in this case) can produce.

Put another way, given the nature of our production process, here we have one project (Machine A) running at 50% of capacity, Machine B is at 100% and Machine C is at 62.5%.

That’s the optimum output, and the maximum machine utilisations, for your factory under those conditions.

Flipping that around

Important though that is for the accounting nerds among us, that’s not what we’re primarily concerned with today.

Once we identify our limiting factor of production (Machine B) we have a range of strategies open to us.

For example, if we bought an identical machine to Machine B, we would presumably increase our output from the “B” section to 10,000 units an hour (2 x 5,000 units per hour), so that it matched up with the production rate of Machine A.

In that scenario, Machine C is now our limiting factor of production, because that’s not going to run faster than 8,000 units an hour, even though both Machine A and Machine B (x2) can now handle 10,000 units an hour.

If we forget about the excitement of management accounting for the moment, what does this tell us about the company’s priorities?

Well, in this scenario, any time invested to improve the output of Machine A is completely wasted, as is any time spent doing the same to Machine C. No matter how much better those machines run, your factory will still never produce more than 5,000 units an hour because that’s the maximum throughput of Machine B, your limiting factor of production.

Linking back to where this article started, by far your biggest business priority should be working out ways to improve the output of Machine B or, as in this case, just buying another identical machine to double the “B” section’s throughput.

In fact, anyone doing anything other than fixing the “B” section problem is by definition incurring cost for the business without generating any upside.

Will rewriting the expense claim policy fix the Section B problem?

Or the all-staff, offsite awayday?

Or the digitising the paperwork archive in the finance department to save on external storage costs?

No, they won’t. But those projects will rumble on in the background anyway, clocking up time and cost without actually fixing the biggest issue holding your business back at the moment.

It’s not as simple as this

Of course, it’s not quite as simple as this. I’ve just expressed the problem in fairly stark terms to make the point.

I don’t suggest you pay your corporation tax six years late “because we were doing more important jobs”. HMRC tend to take a dim view of that sort of thing.

But it does illustrate the way that most organisations are happier rumbling along with a jumble of 10% completed projects when they would nearly always be better concentrating all their efforts and resources on the biggest problem in the business instead, and doing their best to fix that.

The biggest problem in the example above is getting more throughput in Section B. Nothing else in your business even comes close at being able to generate better bottom line results.

Knowing your limiting factor of production allows you to make better management decisions.

Let’s imagine the all-staff, offsite away day was organised months ago and is taking place next Tuesday.

Next, some insightful CFO (ahem…) explained the concept of limiting factors of production to you.

Then you hear that the suppliers of Machine B are in the country at the moment and could meet you next Tuesday afternoon to talk about selling you another Machine B. However, they need to get a flight home on Tuesday evening and won’t be back in the UK for another month after next Tuesday.

Now what do you do – cancel the awayday and meet with the supplier, or have the awayday and catch the supplier in a month’s time when they’re next passing through?

Put in those terms, the obvious answer is to cancel the awayday, even if you have to pay some cancellation charges to the venue, because the upside to your bottom line of getting a second Machine B at least a month earlier, based on the hypothetical numbers above, is almost certainly greater than the cost of another day’s room hire for your offsite.

That’s the obvious answer in terms of your bottom line, but I haven’t worked at many places where that’s the decision they would have taken.

Because the away day has been in everyone’s diaries for months, and finding another day the whole board can all be together again will be tricky, and because no-one wants to upset the team who had put all the away day activities together…that’s what gets prioritised.

None of those reasons are completely without merit, of course.

It’s just that compared to increasing your factory’s output from 5,000 units an hour to 8,000 units an hour (i.e. the maximum capacity of Machine C, which has now become your limiting factor of production), nothing else you can do is likely to have anywhere near the level of bottom line impact as meeting the Machine B suppliers next Tuesday.

Knowing me, knowing you

Knowing this dynamic is in play, let’s go back to the original question.

Which would you rather have: 10 jobs, each 10% complete. Or 1 job 100% complete and 9 jobs 0% complete?

If the job you had focused on to the exclusion of everything else was sorting out another Machine B in our factory example above, then you’d much rather have that than ending the day with 10% of the Machine B sorted out, alongside 10% of the new expense claim policy and 10% of the agenda for the all-staff away day.

Equally, if your business had sorted out 100% of the away day agenda, but hadn’t even made a start on buying a new Machine B yet, I’d seriously question the wisdom of that decision.

In most organisations, though, the acceptable way forward is to have 10% of 10 jobs done, rather than 1 job 100% complete.

All sorts of tasks – each of them worthwhile in their own way, and championed by people who mean well – take time, energy, and effort away from what should be your organisation’s number one objective.

Because they don’t understand how limiting factors of production work, most organisations would give their HR Manager a bonus for organising a wonderful away day, but they would fire the HR Manager if, at their appraisal, they said they hadn’t done any of the objectives set in their last appraisal because they’d spent 100% of their time helping Bob in Production buy a new Machine B instead.

In reality, if you cared about your bottom line, you’d give your HR Manager a bonus for pitching in to help deliver the single most bottom-line enhancing project your company needed delivering this year, and fire them if, while a huge opportunity went unattended to, they were fiddling around organising the menu for the away day.

A life of their own

This is a problem with organisational structures. While they are helpful to an extent…necessary even…they often get in the way of what really needs doing.

That’s because, once you set up a Marketing Department, or an HR Department, or a Finance Department they will find things to do in order to keep the people in that department busy.

So someone will be organising the away day, someone will be rewriting the expense claim policy, and so on. That’s the way organisations are set up to operate.

Set up a Department X and inertia takes over. In no time, Department X will be taking up time and energy in your management infrastructure and further reduce the focus on the Machine B project.

Department X will take up airtime and energy in management meetings, which will tie up people for longer than they were before. Time that could have been spent on Machine B.

And that’s because the Head of Department X only has the objective of doing “Department X stuff”. Whether or not Machine B ever gets sorted out isn’t their problem – it won’t interfere with their promotion prospects or pay package in the slightest.

For that reason, while it’s not a perfect model, when you think about bringing in more people to your organisation, or get persuaded that “you really need a Department X here because all our competitors have one”, you should ask yourself one simple question.

“Will doing this help us reduce the impact on our business of our limiting factor of production?”

Now, that presupposes that you know what your limiting factor of production is, which many organisations don’t. Or to the extent that they think they do, it’s something that might be superficially true but isn’t actually the real issue.

During my time in the education sector, for example, an organisation I worked with put a lot of store in making sure that student behaviour was clamped down on to “stop troublemakers” as that was seen to be the biggest issue for their bottom line. The amount of reporting and staff appraisal energy which went into this was considerable.

And although, in isolated instances, poor behaviour was an issue, it had nothing close to the bottom-line impact of running courses which were impossible to make money on – if we needed 30 students to take a course at the level of income we received from the government, but our biggest classroom only held 20 students, that’s a guaranteed sea of red ink on the bottom line no matter how good or bad any student’s behaviour might be.

Because the limiting factors of production weren’t used in this organisation as a basis for making management decisions, much more effort was put into selling these guaranteed loss-making courses than was put into selling courses we could make a profit on.

The question to ask

For that reason, every time you are presented with a request to spend money or hire a new staff member, there are only two things you need to do before making your decision.

Firstly, refresh yourself on what the limiting factor of production really is inside your organisation.

Then, ask yourself whether the proposed action takes you closer to eliminating, or at least minimising, the impact on your bottom line of whatever your limiting factor of production.

If it doesn’t, think twice about spending the money.

However well-intentioned the request is, you’re almost certainly going to generate sub-optimal returns on your investment.

This may surprise you, but in a conversation with someone the other day, they let slip they didn’t have a favourite cost accounting technique.

I know…crazy, right?

Now, in fairness, the bloke I was talking to wasn’t an accountant, but I just imagined everyone in the whole world had a favourite cost accounting technique. So the realisation that this was not the case came as something of a surprise.

Admittedly, it would be truer to say that I have two favourite cost accounting techniques, with a 50/50 weighting, and I generally use them in conjunction with one another which makes both of them together more powerful than either one of them on their own.

But, just in case you’re one of the weirdos who doesn’t have a favourite cost accounting technique, I thought I’d write about one of them today. I’ll save the other one for a future article – after all, it’s always good to have something to look forward to…

Although the principles underlying the technique I’m about to explain go back over 100 years, back to when FW Taylor was busy developing his Principles of Scientific Management, it was probably most used in the 1980s and 1990s before being overtaken by trendier ideas.

As is often the case in the world of accounting, however, trendier is not necessarily better, or more accurate, or more bottom-line building.

Fashionable or not, I have never failed to get valuable insights into a company’s cost structure and profitability by applying the technique I’m sharing with you today, even though most accountants have never used it “for real” and mostly can only recall a superficial fact or two about it from a textbook they studied for their professional exams.

Although if you’ve ever worked with me, or for me, I’ve used this technique so often that nowadays I mostly do it all in my head. I rarely make a big fuss about where the insight for all the awkward questions I ask comes from.

So listen. Do you want to know a secret…?

As easy as 1, 2, 3

The secret is that most cost accounting techniques are applied in either a very broad-brush way or in a mechanically, but very specific way. And both approaches are wrong.

Wrong, but surprisingly popular.

People take what looks like “the easy route”, but this leads to many organisations making poor commercial decisions. They have an unrealistic, and inaccurate, view of what their costs really are.

This is so much the case that when I come across an organisation in real trouble, the root cause is often that they’ve made perfectly sensible and logical decisions based on the information they get from their cost accounting system.

It’s just that the information in that system doesn’t reflect either the organisation’s true cost structure or its commercial realities.

Put away the broad brush

To give an example of the broad brush cost accounting approach, a company might work out a charge-out rate for their team of field engineers by adding up all their salaries and dividing that total cost by the number of engineers they employ.

One, but by no means the only, problem with this approach is that the company will lose money on every job they put their more experienced staff on do because the rate they pay their more senior engineers tends to be higher than the average rate used to work out the costing for clients.

Sometimes people argue that doesn’t matter provided that, on average, every engineer is kept as busy as every other engineer. And mathematically, there’s something in that argument.

Except the commercial reality is that your senior engineers will normally be allocated to the trickier jobs, the bigger jobs, the jobs for your more important clients where you wouldn’t be comfortable letting a trainee engineer loose by themselves.

Even if, on average, the costs come out about right (and even then I’d be sceptical) what you’re really doing here is dramatically under-pricing the more complex jobs you do for clients.

A job that ties up a team of senior engineers for several weeks should bring significantly more income into the business on an hourly basis than the same number of hours a junior engineer spends changing filters on less technically demanding jobs.

If it doesn’t, you’re leaving money on the table.

The “mechanically specific” trap

At the other end of the spectrum, a spreadsheet wrangler somewhere allocates every cost in the business, in minute detail, to every product and service, generally under the cover of “being commercial” or “being tough on costs”.

Carrying out that process to some level is worthwhile. But so is knowing where to stop.

And that’s probably long before you allocate 50p in stationery costs to each job because, on average, you do 100 jobs a year and spend £50 on stationery.

But with a barrage of Excel macros, management information systems, and…God help us…Power BI, you’d be amazed at the level of detail you can get to pretty quickly.

I mean, not that it’ll actually be useful in any way, but it’s impressive enough for people who like playing around on spreadsheets.

What too many organisations do is mistake information at that level of detail as a helpful input into management and commercial decisions. It rarely is.

Although it did give me some amusement in a management meeting several years ago when I worked with a business facing £multi-million losses and a likely emergency funding round.

In all seriousness, the single big cost-saving idea from one of the senior managers was to send all our post second class instead of first class.

He had gone to the trouble of working out that second class stamps were something like 30% cheaper than first class stamps. Impressive bit of detail there.

But he was so proud of his 30% saving – well above the 10% target the organisation was trying to reach – that I may have burst his bubble when I pointed out, as gently as possible, that since the organisation only spent £5k a year on postage, even if we didn’t send out a single letter, it still wasn’t going to make much of a dent in a £multi-million black hole.

This information was admittedly very specific. But also pretty useless in the context of the problem we were trying to solve.

If you’ve read this far, you may not be surprised to learn that one of the reasons this organisation was in trouble was precisely because they didn’t really understand their costs and how management decisions impacted the bottom line well enough to make the best decisions for the business.

As simple as do re mi

While it isn’t quite a simple as ABC, 123, or do re mi, the principles behind one of my two favourite cost accounting approaches are easy enough to grasp. (Sadly, space doesn’t permit covering the topic in more depth…well, sadly for me. You, dear reader, are probably eternally grateful.)

But here are the guiding principles.

1 – Split your costs the right way

Organisations generally think of costs in two categories – fixed costs and variable costs.

Now, in a pure accounting sense, there’s some truth in that way of looking at the world. However that’s not necessarily very helpful when it comes to commercial decision-making.

Instead, think about your cost as those costs which directly relate to creating something your business sells – whether that’s physical products or services – and all your other costs.

You will find that, as a generality, variable costs are more likely to be part of delivering a product or service, and fixed costs are more likely to end up in the “other costs” bucket. But that’s not a perfect split for a range of reasons, one of which we’ll come onto in a moment.

So, the rent on your factory is not a cost that directly relates to creating the physical products you sell. Even though it’s an important cost for your business, you’d still need to pay the rent even if you didn’t sell a single product.

On the other hand, the sheet steel which gets delivered to be bent, twisted, and machined into your finished product is very clearly a cost that relates to the products you sell.

If you had no orders from clients, you wouldn’t buy any sheet steel.

2 – Get clear on your cost drivers

When I was a CFO, I rarely came across a business which had the level of clarity on its cost drivers that it really needed to make good commercial decisions.

For our purposes here, you can think of a cost driver as “the reason why we’re spending this money”.

If you need sheet steel to manufacture your products, the reason you buy sheet steel is to satisfy customer orders (assuming, for simplicity’s sake, that there is no stockholding to factor in here).

So the driver for the sheet steel purchase was the order from your customer – no order, no steel required.

There is an argument that you only do this for the input costs to your products and services, but I find many traditional accounting systems have all sorts of costs which move around depending on a wide range of different cost drivers, so you’ll get valuable information about your business by doing this in as many places as possible.

If you do, you’ll also find a remarkable amount of cost hidden away in your overheads that fluctuate for all sorts of reasons, all of them unrelated to manufacturing your finished products or services. Until you understand what those costs are, and the activities that they relate to, you don’t really understand your cost base well enough.

Your marketing department will have a range of costs which are driven by their lead generation activity, for example, which will be entirely disconnected from receiving a customer order.

There may be some vague relationship between the two, in that lead gen activity today will turn into clients in 9 months from now, at some expected conversion rate or other. But that’s a weak relationship and if you sell multiple products and services, actually not that helpful (although you should, of course, measure all those things for other reasons).

It’s much better to be clear that the “trigger” for lead gen spend is the marketing department deciding to do some lead gen activity.

Given the likelihood is most leads will not turn into customers anyway, it’s better to accept and understand that purchases of sheet steel are driven by customer orders and lead generation activity in your marketing department is not.

Each of those spends have different cost drivers, each of which needs tracking and managing in different ways.

3 – The “other stuff”

Once you’ve done that, you’ll find a couple of interesting things.

Firstly, if my experience is anything to go by, you’ll discover that when you assemble your products and services based on the individual cost drivers that go into them, you’ll have an entirely different way of looking at your product or service costs than you ever had before.

You’ll discover some wild things – it’s not uncommon to find that the product everyone thought was the most profitable is in fact the least profitable, and some unloved and largely ignored product is in fact a potential superstar hiding in the shadows.

Usually, you’ll also find that there’s an astonishing amount of cost in your business with no obvious cost driver at all. When you find them, ask some really pointed questions about why those activities is being carried out at all, because odds are you can stop doing whatever it is and not notice the difference…except to your cash flow and bottom line.

More importantly, you’ll discover where the inefficiencies in your business are.

Maybe a big chunk of activity, and therefore cost, in your HR Department is driven by the need to performance-manage out poor performers in your organisation.

While by the law of averages you’ll hire someone you wish you hadn’t every once in a while, if this is happening on a regular enough basis to account for a big chunk of cost in your HR Department, odds are your business is doing a poor job on the recruitment front.

Or perhaps the business isn’t paying well enough to attract people with the skills you want so the recruitment team is settling for people who can’t really do the job in the first place just to fill a recruitment quota.

Maybe the business is failing to take action soon enough in the early days of employment, or provide enough training, so that stores up much bigger problems down the line, requiring HR to get involved.

Every time you find yourself saying something like “we spend how much managing out poor performers???” that’s a sure sign that there’s an inefficiency in your business which, if you fix it, will result in a more profitable, smoother-running business, with lower costs.

Back to ABC

In an admittedly very brief way, what you’ve read so far is a high-level summary of some of the benefits of a cost accounting technique called Activity Based Costing, or ABC.

Done the right way, ABC brings a level of insight into the commercial and operational side of your business that’s vastly more insightful than standard management accounting techniques.

The way I do it, I mix it with a little bit of another costing technique, which I’ll talk about some other time. So I don’t use “out of the box” ABC exactly.

But if you’ve never tried this approach before, you’ll discover a lot about your business by just doing an “out of the box” ABC review.

A pretty good place to start is Robert Kaplan (the “balanced scorecard” guy) and Steven Anderson’s book “Time-Driven Activity-Based Costing”.

There are some who say Activity-Based Costing is a complex and expensive technique which doesn’t offer a high enough RoI. But, with the greatest of respect, I’d have to say that whoever came to that conclusion hadn’t seen a good ABC project up close.

Admittedly, I’ve done this loads of times, but give me a couple of hours with a set of accounts and a few people in the business to talk to and I can have an 80/20 model up and running pretty rapidly and inexpensively.

Yes, you can make activity-based costing long-winded, costly, and ultimately pointless. But the same is true of every management technique that’s ever been invented, if it’s done badly enough.

It might not be your thing, and you may, in time, develop your own favourite cost accounting technique – nothing would delight me more. But until then, I’d encourage you to give ABC a try.

I’ve never yet applied it in an organisation and not found at least one game-changing nugget of information or one life-altering perspective emerging from it.

You might be surprised what you find too.

Recently, I watched a documentary on YouTube about the Moulin Rouge in Paris, the home of the can-can.

YouTube, being YouTube, thinks if you watch one video on any subject, they need to cram your feed with other videos on exactly the same topic for the next few weeks.

So I’ve seen more than my fair share of videos of people dancing the can-can in my YouTube feed lately.

However, it struck me that my brief foray into this uniquely Parisian dance might serve as a metaphor for our interactions with the tech world today…a world that’s higher on AI than the average French poet of the 1920s would have been on Absinthe and Gauloises.

Let me say, I’m not completely anti-tech. Microsoft Excel has been my constant companion through most of my working life. Although I’m just old enough to have kept a set of accounts on an entirely manual accounting system right at the start of my career, modern accounting software does a great job of keeping things simple and efficient.

However I firmly believe, notwithstanding the hype that’s generated about the sector, that tech is already at, if not beyond, the point of diminishing returns (individual organisations may, of course, deliver real value, even while the average return for the sector as a whole is at, or below, zero).

I wouldn’t want to go back to manual bookkeeping, but it’s also true that you can spend £100,000 on an accounting system with very little functionality beyond what you get, in pure accounting terms, from a £20 per month accounting system. They both produce perfectly acceptable balance sheets.

So, as more and more money is poured into AI-powered tech, I feel a shark may have been jumped.

With art, the whole is more than the sum of its parts

What I love about art is that you can’t approach it as if it was an engineering problem.

If your BMW stops working, you take it to a mechanic who diagnoses the problem through a process of elimination, before repairing or replacing the part that caused the problem.

This is a reductive process. The mechanic starts from a set of known factors and breaks the big picture problem of green smoke pouring out the back of the car, say, down into smaller and smaller elements to solve the problem.

However technically difficult it might be, after the mechanic has identified all the parts of the engine which work exactly as intended, through an entirely logical, reductive process, they must be left with whichever component caused the problem. Then all they need to do is fix or replace that and the BMW is back in the known condition they defined at the outset – stopping the green smoke coming out the back of the car.

Art works the other way round.

Artists start with small units of something – a brushstroke on a piece of canvas, an interesting bar or two of a melody, an idea for a movie – and build up to the big picture in the process of creating a finished work that amounts to more than the sum of its individual parts.

A painting by Picasso is more than a series of individual brushstrokes. Yes, the brushstrokes are part of the story, but that’s not all there is to a Picasso. There’s so much more beyond the purely mechanical process of applying paint on canvas.

Now, when I make statements like this, I usually get people telling me that sometimes art is terrible and sometimes engineers create something entirely new and end up sending astronauts to the moon.

Both of those observations are true, of course. But, outside NASA, not many engineers are trying to send people to the moon, whereas every artist is at least trying to create something more than the sum of the parts.

The Moulin Rouge

The Moulin Rouge has been a prominent feature of Parisian nightlife since the late 1800s. Over the years, it has hosted a wide variety of performances but, for many people, The Moulin Rouge is very much associated with the can-can.

Fun fact: dancers at the Moulin Rouge must be very tall – 5′ 9″ for women and 6′ 1″ for men, according to the Moulin Rouge website. This surprised me because every dancer I’ve ever met, male or female, has been about 5′ 2″.

At 6′ 5″, if I ever think of shifting into a dance career, at least now I know where to look for a job.

Of course, an AI-powered dancer hiring system would know that the average dancer is 5′ 2″ and would spend its time looking for people who were around 5′ 2″, while screening out candidates over 5′ 4″ as being too far from the average they’re looking for.

But there’s a reason your brain probably doesn’t hold the name of too many ultra-famous dance venues or ultra-famous dances. Put most people on the spot, and the can-can at the Moulin Rouge is probably the example that most often comes to mind.

AI might work after a fashion if you want bland, average, me-too results produced cheaply. It’s like a Third World backstreet sweatshop producing knock-off designer handbags to be sold out the back of an old Transit van in a pub car park. If it’s cheap enough, and mimics the original well enough to look like the real product on a quick glance, some people will buy one.

Although if the limit of your ambition is bland, me-too, copycat results, you might want to start wondering about whether that’s likely to be a good thing for the long-term success of your business.

Technology is poor at spotting excellence because it doesn’t fit neatly into a programmer’s “laboratory model” of how the world ought to work.

By definition, excellence means doing something most people can’t do or won’t do. If you truly want to be the best, a “me-too” average isn’t nearly good enough.

AI loves an average, though. The entire sector works on the basis of trying to spot what average looks like and then replicating that.

Although, if AI is only shooting for the average, that means there are a huge number of potential solutions above that 50% average line. That’s the territory where excellence lives.

In case you think I’m being harsh, try applying for a job online. Automated screening systems are designed to surface bland, tick-box conformity for shortlisting and send “Dear John” letters to the really good people who don’t tick all the boxes for some third-rate, average-seeking, pattern-matching algorithm.

The role of tech in recruitment, as far as I can see, has been to dilute the average quality of shortlisted candidates, because the really good ones, by definition, don’t look like the average candidates the algorithm is designed to find. So they never get invited to interview.

Getting in the reps

My experience is that accountants who have done manual bookkeeping at some point in their career tend to be vastly better accountants than those who have only ever learned which buttons to push on a computerised accounting system. (Exceptions apply in both directions, of course.)

That’s because doing a set of accounts manually gives you a feel for how accounts really work because you’re always posting the double entry at the same time. So you’re putting in the reps and really getting to grips with how a set of accounts really works.

With computerised systems, you often only post one side of the entry and the other side magically posts itself within the software.

For as long as it works, that’s fine. However, a few years ago I worked with an excellent colleague who, I was astounded to learn one day, didn’t know how to correct an error in the system (which just needed a simple journal, for any accountants reading this).

This person was incredibly hardworking and efficient, and did a great job…unless something went wrong, when they didn’t understand double-entry bookkeeping well enough to correct the error. They were fantastic at “working the system”, but very poor at understanding what was really going on when they pressed the buttons on their screen.

Something similar, although vastly more glamourous, I’ll grant you, happens at the Moulin Rouge.

Dancers don’t just rock up 10 minutes before a show, pop on their costumes and go out on stage.

No, they’ve been at dance classes since they were 5 years old, training hard, building up the muscle memory, finding better and better ways to express the music through their movements.

Before they get good enough to even audition for the Moulin Rouge, those dancers have practiced the same moves 1000s of times until they’re perfect.

AI, on the other hand, doesn’t do the reps. And its proselytisers would have you believe that the reps are unnecessary on your path to excellence (that’s excellence in AI terms, so average to the rest of us, of course). After all, why would you need to put in the reps when you’ve got a magic box of tech tricks to do that for you?

But in any field of human endeavour, the reps are what separate the excellent from the average.

Nowadays, I can glance at a set of accounts and know exactly the story they tell without even having to fire up Excel. I couldn’t do that at the start of my career 30 years ago, but I can do it today because I’ve had 30 years of practice.

Similarly, a skilled technician can tell you what’s wrong with your car just by listening to the engine for a moment and a skilled plumber knows what’s broken in your central heating system just by tapping a pipe.

I could go on, but you get the point – getting in the reps matters if you want to be the best at anything.

If, at this point, you think you’re prepared to settle for delivering a bland average result, ask yourself how sound a business strategy that’s likely to be when everyone who buys the same piece of software can get exactly the same result as you.

If you like that, you’ll like this

The tech world loves a bit of pattern matching. A common example is the “if you like that, you’ll like this” recommendations on just about every streaming service, ecommerce site, and travel website. Those recommendations are based on aggregating buying data from thousands of other people who bought what you just bought, and identifying what they bought next.

The theory is that if enough other people bought Product B immediately after buying Product A, then you probably will too. It’s not completely crazy as a concept, but equally just because someone else bought a copy of “War and Peace” and then bought a fishing rod, it doesn’t mean that’s necessarily what I want. Yet fishing rods will appear in my “people who bought that also bought this” recommendations.

There are some benefits, though. For example, it means that because I watched one video about the Moulin Rouge on their platform, my YouTube feed has been full of people dancing the can-can, to varying levels of ability, over the last couple of weeks.

I learned three main things from watching a selection of them:

1 – It ain’t just the moves

People can copy the moves…at least up to a point – there are little “cheats” that less skilled dancers deploy when dancing the can-can which most people in the audience wouldn’t notice.

However, the routine isn’t a state secret. You can go to the Moulin Rouge, watch a performance, write down the moves the dancers make, and try to replicate them with a group of 11 year-olds in a church hall if you want.

Most 11 year-old dancers have probably been dancing for 5 or 6 years and can, at least up to a point, replicate the moves.

I don’t mean this disrespectfully in any way. If you’re a kid getting your reps in for an audition at the Moulin Rouge 10 years from now, that’s absolutely fine (see above).

But, again respectfully, thousands of people a year are probably not coughing up £100s a ticket to watch that performance.

Yet the Moulin Rouge has no problem filling all their seats twice a day, with people spending £100s or £1000s to be there.

How can that be? After all, whether they’re performed by professional dancers at the Moulin Rouge or a group of youngsters in a church hall, they’re the same moves. So, presumably, the ticket price for those events should be the same, right?

Well, AI would say yes. But no human would, because we’re able to factor in things other than just the moves.

It’s too irrational for AI to deal with, but getting on an aeroplane, being in Paris, attending a show at a world-famous venue, seeing the best professional dancers in the world, and a whole host of other factors go into a decision which – irrationally to AI, but perfectly rationally to actual humans – make “essentially the same thing” worth either £0 or £1000s, depending on the context.

2 – The end result isn’t just the moves

Again, being respectful to young dancers getting in the reps, the tricky thing in copying a dance like the can-can is that the moves aren’t the moves.

Or at least, the moves alone are not the whole story. They’re just part of it.

Even something really simple like an instruction to “shake your pleated skirt as you move across the dance floor”.

Watch a professional Moulin Rouge dancer do that, then check out some of the other videos online. They are not remotely the same thing – the professionals have an effortless grace and style in even the simplest things that most people who just copy the moves can’t come close to.

And that’s also because of the reps. I don’t know for sure because, despite being tall enough for a job at the Moulin Rouge, I’ve never actually worked there as a dancer. But I’m prepared to bet that newly-hired dancers spend hours in classes working on the subtleties of how to shake those red, white, and blue pleated skirts. They’re not just set loose to work it out for themselves in the course of a performance.

Of course, that’s just a few seconds of each routine. The professionals do the same with every other aspect of their performance too. Yes, they’re incredibly talented dancers, but before joining the Moulin Rouge, they’ve been getting in the reps for 20 years or more.

In the hands of a skilled professional – whether that’s a Moulin Rouge dancer, an accountant, a garage mechanic or a plumber – the end result is always more than just the moves.

All AI can tell you is the moves.

3 – It’s not just you

I sometimes talk about my “law of exponential complexity”. Put simply, it means when you introduce another person, another piece of machinery, or another business process into an existing operation, the relationship between those elements is an exponential one, not a linear one.

If you currently employ 10 people and hire someone else, you haven’t increased the complexity in your operations by a linear 10%. You’ve probably increased it by 20%, 50%, 100% or more, depending on who they are and what they do in your business.

Tech can’t understand that because it only thinks in discrete units and has to assume there are no externalities or complexities, otherwise its entirely logical decision-making process could never reach a conclusion.

Sadly, in today’s world, we are drowning in complexities and externalities. Very few daily activities for the average human take place in completely closed systems, where we can pretend the real world operates like the inside of a hermetically-sealed laboratory environment to all intents and purposes.

There’s a sliding scale, of course, but the times you even get close to the “laboratory conditions” where tech alone might have all, or most, of the answers is probably less than 10% of the average person’s life.

We live in a profoundly irrational world. But tech can only operate rationally. So it misses all the important stuff.

One reason it’s challenging to be a dancer at the Moulin Rouge is that you can’t just think about yourself.

A performance is about the interplay between you and dozens of other people on stage. All sorts of things can happen – serendipitous moments of joy and calamitous moments of disaster – but you need to keep going regardless and adjust what you’re doing on the fly to fit those new circumstances.

Which, if you believe my law of exponential complexity, is going to happen relatively often. Putting 40 dancers on stage at any one time – even hugely skilled, well trained professionals – introduces 100s of extra ways a performance can go horribly wrong compared to just a single dancer replicating the component parts of the dance as a solo dancer.

The real skill of a professional dancer is in how they work with the bits that go wrong to make sure most people wouldn’t notice. You need bags of talent, and you need to have spent years learning your craft and putting in the reps, to be able to deliver excellence on the fly in any profession.

To AI, 40 dancers is just 40 x 1 dancer.

To anyone who knows anything about the real world, that’s not how the maths works at all.

An inability to think in complexity with multiple externalities and ever-changing variables is beyond the capability of tech today, and probably in my lifetime (if it ever does).

It’ll get a lot better

When I write articles like this, tech bros and tech gals give me two sorts of feedback.

The less talented ones tell me that 40 dancers really is just 40 x 1 dancer because they are incapable of thinking widely enough about the problem. They might be great at coding in the lab, but they don’t understand the real world in the slightest.

Those folks think the irrational world of reality, full of complexity and unpredictable externalities, should operate exactly like the hermetically-sealed laboratory environments in which they’re comfortable. There is zero evidence that’s likely to happen any time soon, but the tech bros and tech gals have to keep up the pretence that it does, otherwise their tech has no value.

More talented tech bros and tech gals tell me that, whilst they can understand – if not entirely agree with – my perspective today, tech will rapidly improve to the point where all my objections will be nullified.

While I agree the tech will probably improve, I suspect what’s really going to happen is that we’ll move from the equivalent of a troupe of 11 year-olds dancing the can-can to the equivalent of a troupe of 13 year-olds instead.

Ultimately the elements which lend themselves to a purely logical thinking process will be improved. But in an irrational world full of unpredictable externalities, even a “new, improved” version of that magnitude is not all that much closer to a good answer outside a tech company’s laboratory environment.

Respectfully to the young dancers involved, you’re unlikely to spend any more money to see 13 year-olds perform the can-can in a village hall than you would have spent to see the same dance performed by a group of 11 year-olds, even though the older dancers will have had more practice and are likely to be slightly better.

Yet you’ll still spend £1000s to see pretty much the same moves (subject to the caveats above) at the Moulin Rouge.

I…am…a…human

I can live with tech being tech. But when tech pretends to be human it’s about as cringy as listening to your grandmother recount the highs and lows of her love life at a family funeral.

A lot of AI reminds me of my days in the call centre world, when overseas call centres tried to sell into the UK by giving people who clearly weren’t native English speakers names like Dave or Jane and briefing them on the plotlines of Coronation Street and Eastenders so that “Dave” or “Jane”, 8 or 9 time zones away, could make customers think they were speaking to a fellow Brit.

The reality is these people were from entirely different cultural backgrounds where just knowing some facts about TV soap operas they’d never watched wasn’t nearly deep enough as a cultural back-story to fool the customers. The words, the script, the fake names, and the daily briefings on the plotline of Coro did not make overseas call centre operators seem remotely convincing as “Dave from Preston”.

That’s not to be disrespectful to the people concerned. They were just doing the job they were asked to do, to the best of their abilities.

Their employers, however, made the same mistake AI bros and gals make today.

They assumed that facts alone – the words which comprise 7% of the communication – were all their staff needed to appear British. The 93% of other, harder to find, culturally-specific stuff was, they believed, irrelevant.

It’s no wonder most people weren’t fooled – yet that’s pretty much what AI does.

And it’s quite sinister when you think about it.

People using overseas call centres in this way essentially started every new customer relationship based on a lie, just like the chatty chat-bots with names like Susan, who claim to be helping you with your customer service issues.

In reality, “Susan” is just some tech bro’s robot fantasy woman, only capable of operating logically based on whatever programme that tech bro installed in her memory.

I don’t find that “impressive technology”. I find that deeply disturbing on a psychological level.

It’s one thing to be upfront about the fact that you fired all your staff and you’re operating a purely AI-powered business. At least then I can click the back button on my browser immediately and go and buy somewhere else.

But if the first couple of interactions are semi-human…which isn’t all that hard to do as it’s usually only as you go deeper into a conversation with a chat-bot that they get found out…and you’ve made me waste a minute or two of my time before being able to click exit and go and buy somewhere else.

Now I’m likely to resent your business a lot more than if I’d just been told upfront that nobody at that business was serious about helping me solve my customer service problem and had palmed me off to an AI-powered version of “Dave from Preston” instead.

Contrast that with the can-can.

The can-can is 100% human. Humanity courses through the veins of the dancers…the successors of the Parisian working-class women of the 1800s who developed early versions of the can-can to let off steam after a hard week working long hours as a seamstress or a scullery-maid.

That’s why the can-can delivers joy in a way tech never will.

Of course, I get it to some extent. In my line of work, completing a purely logical exercise to get a set of figures to balance back to the number they should balance back to does bring a fleeting moment of quiet satisfaction.

As does completing a crossword, a sudoku puzzle, or writing a computer programme that makes a robot raise its “eyelid” to allow a camera to record the scene in front of it, I’m sure.

There’s intellectual satisfaction, of course, but that’s not nearly the same emotion as joy.

Satisfaction can come from logic. Joy can only come from humanity.

And if you run a business, ask yourself this: would you prefer your customers to be satisfied with your business or joyful about it?

If you want to run a truly exceptional business, you need a lot more of the latter than the former.

AI solves the wrong problem

To the extent that AI solves any problems at all – and I’m currently sceptical on that point, because all I’ve seen AI do so far is make everything worse – it solves the wrong problem.

It’s like the old saying about climbing the ladder perfectly, only to find out it was leaning against the wrong tree.

In the end, AI might work well in areas similar to PC-based computerised accounting systems in the 1990s. As long as there is no discretion involved – debits are always on the left and credits are always on the right – for low level functional tasks, maybe it has a role.

Maybe even in some data analysis tasks because AI can operate as an interface to save people having to learn how to programme complex data analysis software.

But most of the value in the world these days is in the intangible, not in the tangible.

AI handles intangibles really poorly…and is likely to continue doing so for the indefinite future because the real world is not as logical as tech bros would like to believe it is.

If you doubt me, think about the car you drive, the house you live in, and whether or not you’d pay £1000s to see a group of amateurs dance the can-can. Those are all entirely irrational decisions which we post-rationalise with a veneer of objectivity.

Most buying decisions are made emotionally, and post-rationalised logically. AI can perhaps pick up the post-rationalised logic, but it has no idea what the real decision was because that’s buried in a stack of mostly subconscious emotions on the buyer’s side of the transaction, and therefore invisible.

Trying to build a high-performing business has a lot more in common with putting on a performance at the Moulin Rouge than with managing digital 1s and 0s in a hermetically-sealed software laboratory.

I’ve certainly never yet seen a successful business which stays at the top of their game by doing exactly the same as everyone else. But that’s the path we’re on with AI, and tech solutions more generally.

Even when AI works well – which is a tiny fraction of the times it’s more evangelical promoters would have us believe – all it does is increase the pace at which the world is becoming commoditised in everything we do.

The Arts world knows there is very little mileage in trying to recreate a Moulin Rouge cabaret somewhere else and expect people to pay anywhere close to what they pay for the same show at the Moulin Rouge.

So they set out to do something entirely different. There is no significant value in copycat stage shows, which is why, in the Arts, the whole is more than the sum of the parts.

With tech it’s the other way round.

Over the last few years at least two major Twitter clones have popped up which look, feel and operate almost identically to Twitter.

Copying tech is really simple. Coding can never bring differentiation – or if it does, it doesn’t confer an advantage for long because it’s relatively simple to write alternative software to do much the same thing.

On the other hand, nobody is going to beat the Moulin Rouge at putting on performances of the can-can any time soon.

If you’re serious about building a high-performing business, ignore the tech bros and tech gals.

Rather than putting AI in charge of all your business decisions, go and watch a performance at the Moulin Rouge instead.

Watch closely and you’ll learn what it really takes to run a high-performing business.

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If you’re interested in the documentary that was responsible for the YouTube algorithm sending millions of can-can videos into my feed, you can find that here.

And if probably goes without saying by this point, but I haven’t used AI to help write this article. I’d rather risk being terrible by my own hand than churn out bland me-too average filler with the help of AI.

Most businesses, most of the time, want to keep their costs as low as possible. Their not entirely unreasonable thinking is that if revenues remain the same, and costs go down, mathematically, profits must go up.

Over the years, I’ve come across a lot of people who don’t really understand finance properly…including, I would have to say, one or two accountants…who think this is a sure-fire route to maximising bottom line results.

At some level, of course it has an impact. But unless your business has been run by idiots for the last 20 years, that impact is likely to be marginal at best.

Someone on your team is probably already finding out where they can buy photocopying paper for a penny a box less…working out who offers the best broadband deals for your business…getting three competitive quotes for any significant spend.

Formulaic cost cutting like this can sometimes yield results, but nowadays that’s pretty rare. If your team has done even a halfway competent job over the last couple of decades, you’ll be +/- a couple of percent on the market rate for those spends already.

Puzzlingly, it’s still the number one priority self-professed bottom line-focused managers claim to have. Much as I’m an advocate for business education and training, that’s because formulaic cost cutting is easy to teach and easy for students to understand.

If sales were £100, costs were £50 and profit was £50, but now sales are £100, costs are £40, then profits must be £60, right?

Just about anyone can get their head around that mathematical calculation, so that’s what most people who want to grow their bottom line focus on.

Sadly, it’s rarely that simple.

And, in many cases, there are no cost savings to be had at all. If you’ve had someone rigorously benchmarking the price of photocopying paper or utility costs twice a year for the last decade or more, the chances of there being something really obvious they haven’t stumbled across before now isn’t high.

Yet it’s where the vast majority of the cost cutting effort seems to go in many organisations.

The first mistake

The first, and biggest, mistake most businesses make it to assume their revenue number is fixed and they’re only able to manage the cost side of the equation.

I’ll cover this in more detail another time, but the biggest impact you can make on your bottom line is usually to work out how to generate more revenue – both per unit and in absolute terms. That’s likely to yield a much greater boost to your bottom line than anything you can do on the cost side of the equation.

In the simple example above, we cut our costs by 20% and added £10 to the bottom line in the process.

But if, rather than cutting costs by 20%, we found a way to boost revenues by 20%, we’d have added £20 to the bottom line, even if the original £50 cost hadn’t budged.

Accepting this is a sweeping generalisation, it’s worth pointing out that it’s nearly always easier to boost revenues by 20% than it is to cut costs by 20%.

The problem for many businesses is that they don’t have a strong enough brand, and haven’t established themselves in their customers’ minds as anything other than a me-too service provider which competes on price just like every other business bidding for the same work.

Fix that problem and enough customers will probably pay a premium price for what you do, provided you craft your brand and positioning artfully enough.

One of the reasons so much of business education focuses purely on reducing costs is that this is hard to teach. Many of the decisions you need to take are context and industry-dependent.

But if you can crack the code – which you usually can at a very modest cost relative to the potential upside – there can be significant opportunities to boost your bottom line performance which you would otherwise be passing up.

To give just one example, 500g or so of Kellogg’s Corn Flakes costs about £2.20 in Tesco at the moment. A similarly-sized box of Tesco own-brand corn flakes costs less than £1.

Now, from my time in the food packaging sector, I happen to know that the manufacturing process Kellogg uses is different from the own-brand manufacturers, largely because the own-brand suppliers use the cheapest possible production method.

Which is also why Kellogg’s corn flakes stay crispy for longer than own-brands, which quickly turn to mush in your cereal bowl. But that’s not entirely relevant to this story.

Think about it. Excluding manufacturing costs, Kellogg’s need to buy a certain amount of corn kernels, a cardboard box to put it in, and a sealed inner bag to keep the product fresh until it’s used.

What do own-brand manufacturers buy to make their corn flakes? Exactly the same things.

Now, might Kellogg buy a slightly different variety of corn, or spend a bit more on their packaging, or use fancier “keeping corn flakes fresh in the bag” technology?

Quite possibly. But when you strip it down to basics, Kellogg essentially sells exactly the same thing as the own-brand suppliers. They just charge twice as much for it, and enough people are happy to pay twice the price to make Kellogg very successful.

If Kellogg can do this with some very basic commodity products as their raw materials, it’s highly likely your business has the potential – if not to match Kellogg, who have been doing this for a very long time – to make at least a substantial move in the same direction.

The second mistake

Let’s imagine, for the purpose of this article, that we are focusing purely on managing costs down, however. I’m going to talk about this in a manufacturing context, just because that’s easier for most people to visualise, but exactly the same principles apply for service-based businesses.

The second big mistake businesses make is to think they’re managing costs by trying to reduce costs.

I know that sounds a bit “well, duh!”, but hear me out.

Long before you think about managing costs, you need to think about managing your productive capacity.

To make this tangible, if my business has two equal-sized factories and I close one of them, I’ve almost certainly reduced my operating costs, once any redundancy and closure costs have been recovered.

But if, in the process, I’ve also halved my productive capacity, probably that business is no longer covering its overhead costs, and it probably needs to jettison a large number of paying customers to reduce the demands on its productive capacity down to a level it can service from a single factory.

While I admit this is a slightly exaggerated example, you might be surprised how often I’ve seen a dynamic like this play out in organisations when people get obsessed about managing costs without considering the impact on their productive capacity.

In one case, the cost-cutting impetus was so great, the business ultimately needed an emergency financial rescue package because they had cut costs so much, they no longer had a an economically viable amount of productive capacity.

What gets missed

When it comes to managing productive capacity – whether that’s in corn flake manufacturers, lawyers’ offices, or any other business – the few people who are alert to capacity being at least a factor for them to consider tend to get a few things the wrong way round.

Firstly, their focus isn’t at a suitably strategic level.

People focus on getting Machine A as productive as possible, then Machine B, and so on.

While that’s not completely crazy, what you really need to do in this situation is maximise total output across the entire factory which may be, but often isn’t, the same as managing each machine (or each lawyer, hairdresser, or whatever) individually.

Maybe there’s a part of your production process which acts as a bottleneck on your total productive capacity. It’s very likely that rather than cutting costs, you want to spend whatever money it takes to unblock that bottleneck as you’ll significantly increase productive capacity for a relatively modest additional cost.

And because total output goes up, you should generate significant additional gross margin which, against largely fixed overheads, should mostly flow straight to your bottom line.

Removing bottlenecks is a good example of why a purely cost reduction-focused mindset is often not the best way to boost your bottom line performance. Sometimes spending a little bit more unlocks so much extra capacity, more or less “for free”, that the best answer for your business is to spend more, not less.

The second mistake people often make when thinking about productive capacity is imagining that a “good answer” is having all your machines and/or all your people running a full pelt all the time.

This sounds superficially like “the obvious thing to do” and, again, this is an easy concept to teach, so even people who think about managing capacity end up misunderstanding the brief, and end up spending more money even though they think they’re cutting costs.

A real example

You might be sceptical, so let me give you a real example.

I used to run a business which specialised in short-run, fast turnaround work for food manufacturers.

We could have kept our machines busy 24/7 on mega-long production runs, which is what most of our competitors did.

The problem is, if we had to stop a weeks-long production run to fit in a fast turnaround job two or three times a day, the long-run job would cost us more to produce than we made in revenues from it.

To make the long-run job profitable, we would have to turn down all the fast turnaround jobs.

The trouble with this was that fast turnaround work was vastly more profitable than commodity, long-run work where everyone in our industry tried to out-compete each other in a race to the bottom on price.

And even if we decided to “mix and match” a little, the production process in our factory (I won’t bore you with the details) meant there were a limited number of sensible opportunities to switch between different jobs each day, which in turn meant that our highly profitable fast turnaround work might not get to the clients who desperately needed it soon enough.

In time, a reputation for unreliability on deliveries would mean our most profitable work ebbing away and we would be left with just the long-run, barely profitable jobs, like most of our competitors.

So, we deliberately didn’t try to maximise our available productive capacity.

Our machines were idle on purpose for a fair amount of time at the start of each week to make sure we had the ability to respond to highly profitable urgent jobs when one came along.

In the interests of full disclosure, no we didn’t fill that “extra” capacity every week, and occasionally we didn’t fill it at all, but most weeks we used a pretty big chunk of it.

And relative to the low-paying commodity work we would have been doing instead, we put vastly more on the bottom line than we could ever have done by filling up our productive capacity with commodity-priced work.

Part of the reason our clients paid more was for our ability to turn on a sixpence and respond fast, and we built the “inefficiency” from our factory not producing 24/7 into our costs.

For us, the key to boosting our bottom line was protecting our ability to respond fast at all times, even when that meant leaving our machines idle for part of the week.

Our profitability was enhanced by not producing every hour of the day, and running with spare capacity at all times…a concept very few people who think about managing productive capacity consider.

Even fewer can make the trade-off between being able to run machines for fewer hours and still charge higher prices, because they’re locked into a “we can’t do anything about our revenues, all we can do is cut costs” mindset.

Resourcing for the peak

Once that’s squared away, a common mindset that gets in the way is organisations basing their capacity requirements on the average, not the peak.

Averages are the bane of my life among people who think they understand financial management, but don’t.

Any time I hear an average being quoted in isolation, a little bit of me dies inside because an average, in isolation, is pretty meaningless.

Here’s an example: imagine you run a Christmas tree supply business.

On average, you do almost nothing 11 months of the year. In December, it’s complete pandemonium.

So, to run your business, do you buy a Fiat 500, on the basis that, on average, you sell a handful of Christmas trees every week and you can strap a couple of Christmas trees to the roof of a Fiat 500 once or twice a week easily enough?

Or do you buy a truck that’s large enough to transport 100s of Christmas trees a week during December?

Well, only a lunatic would buy a Fiat 500 in these circumstances. Yet the reality is that’s the sort of decision many organisations take on a regular basis.

On average, a business might need 4 people in their call centre over the course of a 24 hour day. But if they want to answer all their calls in under 2 minutes, they might need 8 people between 8am and 10am, which is the busiest time in most call centres.

If they only have 4 people, 4 desk spaces, and 4 sets of telephone equipment, etc because on average that’s all they need, they’re going to have a lot of very unhappy customers. (For a tangible experience of this, just dial any large organisation at random between 8am and 10am on a weekday and see how quickly your call gets answered.)

Governments and large organisations are particularly susceptible to this sort of thinking.

If you build a hospital to service a specific community, and the demand on health services is much higher in the winter than in the summer, for all sorts of medical and social reasons, then the hospital needs to be large enough to handle the “winter traffic”, not the average across all 12 months.

But it’s not just the physical facilities that matter. Getting into a hospital if you’re seriously ill is one thing, but if there aren’t enough doctors and nurses to treat your medical problems, all we’ve done is move a sick person to a different place. We haven’t done anything to cure them yet.

It gets worse.

When a hospital is resourced (in physical facilities and staffing) for its average level of activity, that means when ambulances turn up in A&E at busy times there are no doctors or nurses to care for the patients.

That in turn means desperately ill patients, who could be saved relatively easily with 21st century medical knowledge, are more likely to die at home waiting for an ambulance, in the back of an ambulance on the way to hospital, or in a hospital corridor, waiting to be seen by a medical professional.

That in turn means there are a line of ambulances parked up outside hospitals waiting to discharge their patients.

So they can’t go to the next emergency call when someone’s grandmother slips on some ice and breaks their hip. After several hours of waiting in the cold for help, that frail old lady is much more likely not to survive the experience, or even if she gets through somehow, the experience has almost certainly shortened her life in years and dramatically reduced its quality, meaning much higher social care costs.

Overall the lowest cost solution is probably to have an ambulance to send in a reasonably short period of time. Saving money here has increased the overall cost of looking after this frail pensioner, it hasn’t reduced the costs in the slightest.

There are many, many other knock-on consequences, but you get the point.

In these febrile political times, this scenario is used by some people with an agenda to claim the NHS isn’t working properly.

Except everyone working in the NHS knows this is crazy. They deal with the consequences every day of the week.

But politicians and bureaucrats who lack the understanding to see beyond the superficial (and largely incorrect) strategy of focusing purely on costs without factoring in the impact on capacity keep making crazy decisions like this and ignore the major downstream costs their decisions saddle the health and social care system with.

Lest you think this is a problem with the public ownership of healthcare, I’ve also seen this problem time and time again in large international businesses with similar, if generally less life-threatening, consequences.

Resourcing to the average, nearly all of the time, will turn out to be a really bad decision for your organisation.

Even if there’s no risk to life and limb, you’re almost certainly choosing to hold down your revenues, increase your costs and/or reduce your bottom line, none of which are good outcomes for your business.

The exceptions

Occasionally, people take me to task on this and highlight hotels and airlines as examples of industries where you would want to run at full capacity all the time. After all, you can’t sell a seat on an airline after the plane has taken off, so ideally you want every seat full when you push back from the gate.

While true up to a point, how these industries operate is more subtle than it first appears.

What an airline is really trying to do is maximise the total revenue per flight. One way of doing that is to fill every seat. But another way of doing that is, for example, to increase the number of business class tickets sold vs economy class tickets.

And they’re also maximising other factors, such as on-time arrivals, making sure your baggage gets to the same airport as you do, on the same flight, avoiding major weather systems, and so on.

It’s not unknown for airlines to fly almost empty planes from Airport A to Airport B, perhaps on unpopular routes or at awkward times, just because that allows them to offer a highly profitable flight from Airport B to Airport C. Had they left the plane at Airport A until they had a “full load” back out again, they would have given up the opportunity of running the highly profitable flight from Airport B to Airport C.

And think back to airline bankruptcies in the past.

Most airlines which have gone out of business in a spectacular fashion have done so while they were still flying full aeroplanes. If maximising the number of people on a flight by itself was the secret to running a successful airline, then People Express, TWA, and Laker Airways would all still be flying today.

While superficial capacity management (the % of seats sold when the plane is pushed back from the gate) is undoubtedly one factor, it’s far from the only factor, and maybe not even the most important one.

The secret to cost management is capacity management

If you really want to manage costs well, you need to manage your productive capacity well.

That’s trickier than superficial cost cutting – many of the downstream costs of not managing capacity well will be invisible to you at the point of making a decision. Buying that Fiat 500 in January will look really smart, but it’ll quickly become really dumb in December when your Christmas tree business is running at full pelt and you need a huge truck instead.

Managing costs requires a level of insight into how changes in capacity impact an organisation’s cost base as well as the more transactional “how can I save a penny off the cost of this box of photocopying paper?” decisions.

If you only have time to do one of them, it’s very likely that time spent managing your productive capacity better will generate a much higher yield than just trying to buy whatever it is you buy now a little bit cheaper.

Get your capacity management right first. Then worry about how much you spend on photocopying paper. If you want to run a highly cost-effective business, it doesn’t work nearly as well the other way round.

“Don’t just do something, stand there!” is one of my all-time favourite quotes. Often attributed to former US President, Ronald Reagan (online sources vary), whoever said it opened the door to an important concept – one we probably need to think more about in our business lives.

When something happens, there’s often an implied pressure to “do something”.

That might be taking action to fix a problem, or taking action to repeat or accelerate something that is perceived (at the time, at least) to have gone well.

Often, however, we might be better “standing there” for long enough to think more deeply about the issue, rather than just diving into action mode.

How these issues present themselves is a little different depending on whether you’re trying to fix a perceived problem or to go all-in on something that’s perceived to have gone well.

So let’s take those issues one at a time.

Houston, we have a problem…

A long time ago, I worked with someone who, when presented with a proposal for action to address a problem, always asked “is this a fix or a solve?”

What he meant by that was whether the action proposed was just papering over the cracks – however important that might be in the short-term – or whether it was intended to change the underlying systems and processes to make sure the problem never happened again.

Spending extra budget on an express courier to get a delivery to our customer on time is an example of a “fix”. Ascertaining why our existing delivery system was so unreliable that we had to resort to the extra expense of express couriers from time to time, and doing something to stop that happening, is a “solve”.

We could, of course, spend £000s every day of the week on express couriers and leave everything else the same. Customers would be happy enough as they’d get their deliveries on time, but our carriage costs would go through the roof and our margins would take a hit.

But action is being taken. Someone gets to play the hero: “don’t worry, boss, I’ll make sure the delivery gets there on time!”. That’s got to be a good thing, hasn’t it?

Well, in the short-term, it may be necessary to retain an account worth £millions. And sometimes stuff just happens and you have to do your best in trying circumstances. But when this sort of response becomes a habit, you start to build endemic problems into your business which ultimately, one way or another, will backfire badly.

Contrast that with the “stand there” approach, and taking the time to come up with a “solve”.

Maybe it turns out that the problem isn’t with your haulage contractor at all. They’re doing their best in difficult circumstances.

Perhaps the problem is that the goods they need to deliver don’t get to the loading dock on time – if it’s a 6 hour drive to the customer and the products only land on the loading dock 2 hours before they’re due to be with the customer, no haulage contractor in the world is going to be able to solve that problem for you. All they can do is their best, in difficult circumstances.

Tracking back a little further, it might turn out that the reason products get to the loading dock late is that the machines in the factory are having to run at a slower speed because the maintenance which was due to happen a few months ago had been postponed because your Finance Department had forbidden any extra spend in the run-up to the financial year-end.

Now we have “stood there” for long enough to understand the real problem, the “solve” is obvious. And once implemented, you won’t need to spend a penny on extra express delivery costs.

Or you can keep spending £000s forever on express delivery services just because someone enjoys the rush of adrenaline as they run through the factory to hand an urgent package across to the express courier who’s waiting, Le Mans style, to jump in their van and screech out of your car park on their way to make your delivery.

That’s the benefit of “standing there” instead of “doing something”.

Things are going too well

The “stand there” mantra applies just as much when things are going well.

Maybe you run a successful independent business, which has supplied a range of specialist stores with your products for generations.

Then, one day, a big retailer asks if you could supply them.

It’s a well-known brand. Supplying them would be good for your reputation, and give some valuable social proof to use with sales prospects among the specialist stores you target.

And more sales has to be a good thing, right?

Well, not necessarily.

If you do the occasional one-off order for a major retailer, probably nothing will change in your business. But big retailers like to have enough of a share of your business that they can crack the whip and squeeze your prices down – if they threaten to take away 60% of your business overnight, odds are you’re going to do pretty much whatever they tell you to do.

Now, there’s nothing wrong with supplying major retailers. And there’s nothing wrong with supplying a network of independent stores. It’s just that those are two different business models, with entirely different operating principles, and they don’t often make easy bedfellows…especially by the time your big retailer client has taken up 60% of your productive capacity.

What usually happens is that over time most organisations prioritise the big retailer client – “they’re 60% of our business, for goodness’ sake, we don’t want to lose that, so do whatever they say!” becomes your primary operating principle.

Meanwhile your traditional clients get side-lined, feel underappreciated, and ultimately go elsewhere to recapture the top-notch service you used to give them before that big retailer cuckoo landed in your nest.

As your traditional clients drift away, that 60% share of your output taken by the big retailer drifts upwards to 70 or 80%, perhaps. A few of your other clients will hang around, perhaps due to inertia, or some personal connection with you. Although it’s unlikely you’ll land another big retailer as a client because retail is an intensely competitive market and the last thing any retailer wants to be is an afterthought in another big retailer’s major supplier.

So ultimately your business becomes a production unit for the big retailer, operating on wafer-thin margins and entirely dependent on the big retailer continuing to buy from you as they take up 60, 70 or 80% of your output.

It’s not great secret that this is how major retailers work. A business I used to run supplied lots of businesses which had relationships with major retailers like this, and they were rarely masters of their own fate.

Admittedly “more sales” is a good thing. It’s something most businesses, rightly, strive for.

But what if, knowing the retailer’s likely end-game, you just “stood there” when the retailer asked if you could supply more than their initial small trial order…and perhaps ultimately form a long-term partnership with them, resulting in £millions of future revenue for your business.

“Doing something” is the easy way out. It gives the appearance of activity. In the short-term, at least, it appears to be eminently sensible and helps the business grow sales revenues faster than dozens of specialist retail clients ever would.

“Standing there” is much harder. But sometimes it’s the right thing to do, in the end.

Do something or stand there?

That being the case, how do you know when to do something and when to stand there?

Well, of course, every situation is a one-off, so I can’t give you a cookie-cutter approach that’s guaranteed to work every time. But there are a few things you can look out for, which might give you some clues.

1. Put out the fires

If your building is on fire, grab a fire extinguisher (if it’s safe to do so) and call the fire brigade. Don’t agonise about taking action to prevent a disaster. Stay safe, but take the action. Once the fire is out you can think about other things, but when the building is on fire, do something, even if it’s just to get out to a place of safety.

“Standing there” is unlikely to be a sensible option.

2. Repeatability

If, once in a blue moon, you have to arrange an express delivery for a client, just do it, and don’t spend a lot of time agonising about it. There’s almost certainly no sensible RoI on you spending hours of your time to save £25 a couple of times a year. Just spend the money and get the delivery made on time.

On the other hand, if you’re organising express deliveries several times a day and spending £000s a year, you’re almost certainly not putting out a (metaphorical) fire. You’ve almost certainly got a deeper problem you need to solve – you can’t just keep applying fixes for ever.

3. Business Model

Be especially careful if you’re tempted to do something that gets to the heart of your business model. Even if your new idea is a good one, and perfectly sensible and rational on some level, “standing there” for a little while to consider the new idea in the context of your business as a whole is nearly always time well-spent.

If you currently serve 300 small clients, think very carefully about whether adding one enormous client to that mix is going to work with your current business model. Even if you think it will, it probably won’t. In thousands of almost invisible ways, your business will be set up to service your current client base, much of which won’t sit well with the demands of mega-corp.

It’s not that serving small customers is right and serving large customers is wrong. Both are perfectly viable business models. They’re just very different.

It’s not that you can’t run both a world-class swimming team and a top Formula 1 motorsports team at the same time. However you’re unlikely to use the same people, systems, and facilities to do both.

So “standing there” for a while, and getting clarity on what you really want to achieve, is usually a good idea.

4. Systems impact

Some things in your business are systems, others are just activities (although a remarkable number of people who carry out activities would like you to believe they’re running systems, because that sounds cooler and more scientific).

Imagine you run a factory making beef burgers. You have a series of operations which need to be conducted one after another in a particular way to get the result you want – a perfectly prepared beef burger at the end of the line.

That’s a system.

An activity is something like writing up a policy for how many days of your staff’s annual holiday allowance they can carry forward from one year to the next.

While you need both systems and activities to run your business, you can change the annual leave carry-forward policy any time you like. Your staff might like what you do, or not like what you do, but there are essentially no other moving parts to this process. Writing a policy is an activity, however important and worthwhile, not a system.

However, choosing to replace the machine which mixes onions into your beef burgers half-way down your production line means there will be some impact on your production system – both during installation and on an ongoing basis.

If people don’t like your holiday carry-forward policy, you can write a new one next week.

Once you scrap your current onion-mixing machine, you’re either stuck with all the problems of the new machine for the next 10 years, or you’re spending £millions to buy a different one to get beef burger production back on track.

In either case, it’s better to “stand there” than just rush to “do something”.

5. External impact

The bigger the likely impact outside your business, the more “standing there” while you make sure you understand all the knock-on consequences of your decisions makes sense.

If your plans include a massive price hike for your existing customers, or the dismantling of a decades-long customer loyalty scheme (as one major airline did recently, to entirely predictable howls of anger from their customers), or a decision to save money on commercial waste disposal and dump factory waste into a local river instead…or anything with a likely big impact to your customers, your local community, or any regulatory bodies you need to interface with…then you should probably “stand there” for a while before taking actions you can’t easily roll back from.

Of course, sometimes taking unpopular action is necessary and unavoidable. But often organisations stumble into major issues entirely of their own making because they didn’t “stand there” for long enough to think through the likely consequences of their decisions.

Even worse, organisations in these situations have been known to blame their customers for being stupid, or tell everyone that people are “out to get them” without fully understanding the issues they’ve caused. That’s usually the nail in the coffin of an organisation’s credibility.

As I think Warren Buffet said, your reputation takes decades to build, but it can be destroyed in just a couple of minutes.

Almost certainly the cost of the blow-back against those organisations is several orders of magnitude greater than the benefits they hoped to gain from their original decision. They tend to be highly RoI-negative decisions that many organisations who go through that process never recover from.

So “stand there” for long enough to make sure you’ve worked all those aspects through. Don’t just “do something”.

The conundrum

The tricky bit is that sometimes taking action gets you a result, and sometimes doing nothing get you a better result.

Sometimes taking action, like pursuing a wildly over-ambitious growth plan, send the business into bankruptcy. Sometimes not taking action and chasing the latest, greatest idea is what saves your business while all the lemmings head off the edge of the cliff together after drinking too much of the same Kool-Aid.

How do you know whether you should be “doing something” or “standing there”?

Well, not to put too fine a point on it, that’s where experience, judgement, and leadership come into play.

None of us are infallible, me included. But I’m definitely better at making those calls than I was 30 years ago, when I thought the world was an entirely logical place and a spreadsheet could give you the answers to everything you wanted to know.

Leadership is a messy place. Running a business is complex.

There are no hard-and-fast rules because if there was, everyone would be doing everything the same way by now.

But at least if you start with the five points above, you’ll get some way down the path and, hopefully, slightly better results in the end.

Knowing when to “do something” and when to “stand there” is a key leadership skill.

Don’t confuse taking action with getting you the results you want.

Sometimes taking action just gets you results you most definitely do not want…the problem is it’s likely to be a few months before the chickens come home to roost, and by then it might be too late to change course.

So, when deciding whether to “do something” or “stand there”, choose wisely.