Make Your Numbers and Quit Whining

“Investment is an exchange of money today for money tomorrow.”

-The Economist

A sales executive we’ll call Lynn was rightly concerned about falling well short of target for the year. Her mid-sized firm’s marketplace had shifted quickly; piranha competitors furiously fought for the available opportunities. Sales and marketing approaches that used to work beautifully lost their magic.

The sales miss would mean that net income would fall short by at least $1 million—and probably twice that. Lynn and her team had tried everything they could think of, so she reached outside for help.

An innovative approach, that we both believed would address the shortfall, required a minor investment. Landing even one new account would pay back the investment in less than a month, with the benefits climbing from there.

Then we ran into an iron constraint: Her cost budget allowed $11,000 for sales training for the year. That wasn’t enough for sales training, let alone anything else we planned. Her request for approval of the modestly bigger investment was rebuffed.

“You know the culture of this company: Make your numbers! You are accountable to make your sales numbers and don’t overspend your budget,” her boss told her.

Maybe that was a good decision, maybe not. I ran into that response myself during my corporate life. I see it often in my consulting, too, and want to share the way I’ve come to think about such decisions.

Honoring Both Budgets

Honoring your cost budget is a good thing. It’s also a good thing to honor your revenue budget. As with so many decisions, it’s not a matter of choosing between a good objective and a bad one. That would be easy.

It’s when you have to choose between two good objectives (or two bad ones) that you most need a decision framework.

As is typical, at Lynn’s company the cost budgets and sales budgets were done months earlier. The circumstances then changed. If the company’s decision process doesn’t allow for changes, the right tradeoffs can’t be made. Sticking to a cost budget when doing so pretty much guarantees a sales miss is often not a consciously made decision. It’s just following a defacto decision rule (“Make your numbers and quite whining”).

One solution, of course, is for Lynn and her boss to bring the decision about the tradeoff to a higher level. She would have to demonstrate that the opportunity cost of NOT making the investment is greater than the risk of proceeding with it.

I've developed a decision tool for instances such as these. Click here to discover how Lynn and I demonstrated that the opportunity cost of not making the investment was greater than the risk.