Are You Crossing Your Fingers Too Often?

This cartoon in the Wall Street Journal made me laugh.

Too often, I talk with business owners and managers who seem to be crossing their fingers in hopes that their strategies will pan out. I’ve even seen it happen in big corporations.

No one bothers to run the numbers; i.e., to do the analysis that’s really needed before investing in a new initiative.

That’s no way to run a business.

If you can read early warnings by tracking monthly statistics like KPIs, you can avoid costly errors.

Here’s one of my favorite cases:

• My client was enjoying record quarterly sales and profits and planned a major capital investment.

• “Not so fast!” said the Controller. “I’ve been tracking order backlog and noticed that it’s been declining for three consecutive months.”

• Management listened. Instead of making the capital investment, the company instituted saving measures.

• Within three months, sales for this company and its competitors had fallen by over 25%!

• The company weathered the industry downturn better than its competitors, preserved a solid level of profitability, and had fewer layoffs.

• All this because they had a financial early warning system and a management team willing to listen to their Controller.

What is your SOP? Crossing your fingers or looking at KPIs?

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