Why “Making the Numbers” is Stupid (Part 1 of 3: The Tyranny of “Expectations”)

Let me be clear: I’m going to be pretty blasphemous in this post. Then again, I hope you expect nothing less from me. “Making the numbers” is stupid. It’s a crutch for being simple-minded and weak-spined. At worst, it’s a stick to beat people with which invariably leads to suboptimal, nay, outright stupid behavior. It’s one of the surest ways to guarantee you mortgage the future of your business if you allow the deleterious effects of a “make the numbers” mindset take hold.

I acknowledge many of you who have responsibility for P&Ls or cost centers are about to have aneurysms right now. Chillax. I’ll ‘splain Lucy…

This is too large a topic to adequately cover in a single sitting so I’m breaking it into three digestible posts. And yes, you’ll have to wait for the second and third installments…

First we’ll have to look at how we get into this situation where numbers dominate rational business decision making. Second, we’ll explore the perverse behaviors that result. Finally, I’ll offer a few thoughts on how to get off the psychotic hamster wheel of numerical doom.

Step 1: The Tyranny of “Expectations”

Allow me to offer a bizarre hypothetical example. Imagine you’re watching the evening news Friday night and the weatherman says “It’s going to be a beautiful weekend folks! Get out those picnic baskets and suntan lotion!” When you tune in Saturday night, the same weatherman recaps a catastrophic day filled with thunderstorms, rain, cold, and sleet. Seems plausible, right? Happens all the time. Here’s the bizarre part: he presents the day’s weather recap as follows:

“Well my expectations called for sun, blue skies, and mid-eighties. Unfortunately, God missed my expectations and came in fifteen degrees short with a cloudy and rainy outlook going forward. My forecast was right – God just simply didn’t deliver as expected.” Stupid, right?

Not really. Go read the Wall Street Journal. Replace “weatherman” with “analyst” and “God” with “ABC Company.” The company missed analyst expectations? Ummm, okay… Why isn’t it “the analysts got the model wrong?” Why does the analyst get a break but the weatherman doesn’t? Why do companies have to live up to analyst expectations (based on a dumb Microsoft program) but God doesn’t have to meet the weatherman’s expectations? Stupid.

But that’s the root of the problem. “Expectations” get set by some analytical Excel nug locked up in some investment bank somewhere. Those “expectations” then become law and if a company misses them, their stock is sure to crater. So what’s a good company to do? Well, hit the numbers by golly! Wouldn’t want to disappoint Wall Street, now would we? I mean, if we did, our stock might go down a point or two for a few weeks and our executives might lose some pocket change (on paper, that is). This is the insidious start of it.

And if you work for a privately held company, don’t just sit there all smug and think “well we’re not beholden to the mercurial whims of Wall Street.” No. You’re not. You’re subject to the whims of private owners and investors. Same difference. If you’re lucky, they’re at least close enough to the business to set some reasonable expectations but we all know that’s not always the case.

Yes, it’s a good thing to have clear, measurable and realistic goals. But please realize, those goals are guideposts to help you get to your ultimate destination: the achievement of your business or organizational strategy. Focusing solely on the guideposts at the expense of achieving your destination is a fast track to bankruptcy or acquisition.

Up next: the stupid stuff “focusing on the numbers” makes us do… READ PART 2 HERE.

– Mike Figliuolo at thoughtLEADERS, LLC