Calculated Decision-Making

Cracking the code to the safe is hard enough. You better write down the misses as you go along!

If you were trying to break into a safe that had a five-digit combination, how would you do it? Would you haphazardly guess at the sequence of numbers, hoping you’d stumble upon the correct digits in the right order? Not very efficient, right? Would you try to uncover any clues that might help you decipher what those numbers might be? A better approach, certainly, but still difficult. Knowing on what the combination was based—birthday, favorite numbers, anniversary maybe—is difficult enough. But then you’d need to figure out what the answer to those clues might be. Whatever approach taken, cracking the code of any safe is almost impossible. That’s a good thing, right? Unless you’re a thief, that is. With 100,000 combinations (10 possibilities, including ‘0’, for each digit, raised to the power of 5 for the number of digits in the combination), you have a better chance of becoming a pro athlete (a good thing: 1 in 22,000) or getting audited by the IRS (a bad thing: 1 in 175). But if you were stupid enough to try this feat, what would be the one thing you would have to do? Document all of the failed attempts. After all, if a combination is not correct, you surely don’t want to repeat it.

But that’s exactly what happens a lot of times in business. Especially in small businesses. Often, even, in successful ones. Let’s be honest; the reasons entrepreneurs start businesses are many. But one of the more common ones is to escape the rules, policies, and overall bureaucracy they have faced as employees in other companies. And as we can all attest, there are certainly reasons to dislike these rigid systems, often designed more to play ‘big brother’ and keep employees in line than to get real work done.

But let’s not throw out the baby with the bath water. There are real reasons organizations should implement systems, real reasons why some structure is absolutely necessary. As Les McKeown, author of the best-selling book Predictable Success, puts it, “There is no way to truly scale without developing systems and processes and using them to deliver consistently high quality.” Being consistent, delivering the same product at the same level of quality, every time, is easy when a company is small. The business environment is simple. But as the landscape becomes more complex, both externally (new regions, new types of customers, new product lines) and internally (more employees, larger spaces, increasingly shared leadership), simply ‘winging it’– running the business in an unstructured, undisciplined manner– leads the company in the other, wrong, direction. An order is dropped here. A bill goes unpaid there. And before you know it, the product or service the customer had come to rely on is a shadow of its former self.

Unless a company recognizes, prepares for, and openly defends against this inevitable hurdle, success at a large level is almost impossible. It’s ultimately the reason founders often leave a company once it’s become successful enough to confront this stage that McKeown calls ‘white water’. They simply have no desire for red tape and what they see as needless hierarchy. The mere thought of documentation, protocol, and employee manuals makes them sick to their stomachs. So they often leave, handing over the reins to others more capable of taking the company to the next level.

The difference between managing the business in these two stages can be compared to a bank robber attempting to break into a safe. Back to my opening story. When the combination is 2 or 3 digits, figuring out the combination might be easy. This is akin to running a small business. You can try different combinations (of sales or marketing ideas, of regions to penetrate, of employee training programs) until one of them is successful. It’s easy, furthermore, to wrap your mind around and remember what was successful and what wasn’t without any standardized or formal recording and analysis. But take that same bank robber and put him in front of a safe with 5 or 6 digits and, well, I’ve already given you the odds. This is what it’s like when a company comes out of those early years and is poised and ready to really take off. Everything is more complex. The money being paid, and hopefully made, is much bigger. The costs—and as a result, the stakes—are much higher. And while the potential for great things becomes increasingly plausible, the mistakes in pursuing these opportunities are greatly magnified.

So what is a bank robber to do? Again, write down, or document, the failed attempts! In business, this means that while creating an organized and efficient company helps keep everyone sane and moving in the right direction, its greatest benefit is that it allows for calculated decision-making. The E-Myth Revisited, a very thought-provoking and insightful book by Michael E. Gerber, explains it perfectly. In speaking about and reporting on studies around great companies like McDonald’s, Federal Express, and Disney; he points out how meticulously and painstakingly they work on making their businesses better. To do that, they measure and question everything. It should be obvious that this commitment to improving the business in every way is made possible only through some development of and insistence on structure. But it certainly must not be (obvious) given what many companies continue to do. Whether it’s because they abhor what big companies stand for, lack the skills or interest in championing this sort of change, or are innocently growing too fast to stop and focus on methods and process, the leaders of these companies are failing to make the necessary changes that will help them push through perhaps the most challenging of transitions. While it’s tempting to put or keep the foot on the gas, trying to keep up with the dynamic business climate, this is often the time when doing the opposite—taking a step back to prepare for the road ahead— is more prudent.

I’m not saying it won’t be difficult. And I am saying it will usually cost something, both in dollars and time spent. But I’m willing to bet that whether it’s making sure a training manual is in place for new hires, creating an effective sales pipeline that provides real-time information, or building an enterprise resource planning (ERP) system to help all areas of the business communicate; these steps will prove beneficial. Let’s look at it in a few slightly different ways. Would you get into a car whose gas gauge didn’t measure how much gas was in the tank correctly? Would you rely on a broken clock to wake you up in the morning before an important meeting? And when was the last time you played a game with no idea how to keep score or measure if or when you’d won? Trust me; stopping to tie your shoes before starting the race is well worth it.

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About bbluford
I am an executive finance professional with a love for process and application development (MS Access, Excel, Quickbooks), mostly as it relates to Accounting and Business Functions. I also love to write and share ideas with other people in this world. I'm an admitted Gym Rat who works out excessively. The best summation of me is that I love to teach and to learn.

One Response to Calculated Decision-Making

  1. Philip P. says:

    That was quite the read, definitely broadened my mode of thinking for damn sure.

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