Which Do You Choose - Wisdom or Answers?

If you had to pick, which would you choose - wisdom or answers?

Let’s start with some initial observations and consider some differences between the two.

Wisdom is not some secret key available to only an elite few - it is the exact opposite. Think of wisdom as a free gift that is there for the taking - but you must have the desire to take it. It is not flipping to a topical index or exploring the Internet to see what actions to take or decisions to make. Wisdom should be thought of as lifelong learning process.

Answers are provided by a set of business rules or guidelines yet may not provide exactly what you need. Rulebook answers deliver finality, while wisdom embraces mysteries to be solved. These answers can be distant, but wisdom is intimate and learned through experience. Rulebook answers keep us small, while wisdom gives us the space to grow. Rulebook answers are limited to specific time periods; wisdom is timeless.

What rulebook answers do provide is:

  • Comfort and stability. But wisdom asks us to risk letting go of what we know or think and dig deeper.
  • A quick end to a journey. But wisdom shapes us so we journey with open eyes to see what might lay ahead.
  • An immediate answer. But wisdom takes trial and error over time

Wisdom is not an easy way, but neither is it a burden. Wisdom enables us the freedom to think. It provides the ability to answer important questions that can make a difference.

What kinds of questions should you be seeking answers to in your search for business wisdom? They should be what I refer to as “pain questions”. When they are asked executives and managers they create fear, uncertainty, and doubt – often referred to as FUD. Their intent to create discomfort. Discomfort is a prerequisite for executives to then seek relief and overcome their natural resistance to change. And providing the relief is where solutions from the various enterprise and corporate performance management (EPM/CPM) methods can be applied.

Some key questions, that should be asked of executives and managers and revisited again periodically, are:

Measurement

  • Are we measuring the right metrics?
  • If we are measuring key performance indicators (KPIs), are they “balanced” between financial outcomes and the non-financial measures related to customer loyalty, process improvement, employee learning & growth, and innovation?
  • Are we measuring too many strategic KPIs where many are arguably operational performance indicators (PIs)?
  • Do we measure non-product channel and customer expenses (e.g., distribution channels, selling, marketing, customer service) to report profit or loss by each customer?

Costs

  • Are our product and service-line costs accurate?
  • Do we properly “allocate” our indirect expenses (i.e., overhead) to calculate reasonably accurate product and service-line costs based on “causal” relationships? Or do we “butter spread” expenses with cost allocation factors that simultaneously over- and under-cost products and service-lines?
  • Do we know which customers are more attractive to retain, grow, win-back and acquire?
  • For the more attractive customers, do we know the ROI from our different actions to achieve profit lift from them (e.g., price discounts, deals, offers, coupons)?

Budgeting

  • How effective is our annual budgeting process? Does its benefit exceed the administrative effort and costs to produce it?
  • Is the budget out of date within a few months after it is published?
  • Do experienced managers “pad” their department’s budgets?
  • Is consolidating cost center budget spreadsheets bottom-up within our organization cumbersome?
  • Do we understand incremental / marginal expense analysis classifying the behaviour of our resource capacity expenses as sunk, fixed, step-fixed, or variable based on the planning time horizon?

Culture

  • How well do our managers and employees understand our executive team’s strategy?
  • Are many of our decisions based on intuition or experience rather than on fact-based data?
  • How much competency does our organization have with analytics?
  • How much resistance to change does our organization have that is slowing our adoption rate of progressive managerial methods?

By understanding the answers to these questions today, and how they change over time, you will gain valuable wisdom about your company and their practices. This wisdom will enable you to design and redesign strategies to move forward profitably.

This article was originally published in PACE Forum by the nonprofit Profitability Center of Excellence at Profitability Analytics Center of Excellence (profitability-analytics.org


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