Yesterday vs. tomorrow. What about today?

Another update on the forecast. A small change on the budget. Let's go through it all over again. It has to be precise! Another results meeting, which by the way is about the month that ended three weeks ago. There were some committments from last meeting but no one seems to rembember them, so we move forward, saying once again that we need to improve what we already knew we needed to improve.

Does this sound familiar? We are frequently caught up between these two widely spread and very useful management tools. However, being indeed tools, the way in which we use them is of paramount importance. To be more productive, it is key that we have a clear understanding of what each of these tools provide us and how should we address them.

First, let's focus on what is the time frame that we are looking into with each approach. Did happen, might happen or is happening? When we are looking at results, we are (or we should be) analyzing the past. It's our rearview mirror. When we are working on forecasts, we are looking forward. We are (or we should be) evaluating the future. It's our front windshield.

A look into the past to learn from it. We have already pointed out that results meetings and results reports focus on the past. What happened? How did we do it? How far from our goals did we end? How far we still are? This is an extraordinary piece of information to learn from the past. Of course it also helps to pay a bonus and measure performance, but if in that process you fail to learn anything, you are not getting the most out of it. In life, there's almost always (I've underlined almost) a next month, a next year or a next budget. That is why we need to learn from the past to make an impact going forward. I think we've had all been in a lot of weekly, monthly or yearly meetings to review results. I believe the ones more effective are those in which the meeting begins with 'last meeting's committments' and ends with committments for the next meeting. Of course, that alone is not enough. There has to be some sort of consequences in the meeting for failing to do what was agreed. Unless it is a high performant team in which members frequently asumes responsibility ("I will fix this by doing that"), it is necessary that there is someone in the meeting that asks the tough questions, who defines whose responsibility it is to address the issue. As human beings, most of the time we tend to believe responsibility is outside our control. Sales were not met? It's the tough market. Prices? The market. Production costs or productivity? The production plan, the mix or the suppliers. Higher purchasing prices? Once again the market! Unless there is someone that basically asks questions to understand if the explanation is accurate and sound, assigning tasks to the people who might be able to improve the situation going forward, you might end up in a low productivity management cycle. Everyone gets out of the meeting satisfied, either because they made it through, or because they are still convinced that the issues were not of their own.

A forecast to prepare for the future. Have you ever been caught in a loop in which forecast accuracy and precision were insane to some extent? 'Forecast are always wrong' reads the truism. Yet forecasting can be tremendously useful, when done properly and when well understood. A forecast serves to build a budget, another key tool in management. Forecasting is important, as is to understand what assumptions rely behind each number. If you just look at the numbers, you will lose important information. And let's not forget that Excel resists everything. It's important to understand what was considered for a certain price, what have we considered to sale that volume, how much more from existing customers, how many new customers. Where might that cost efficiency come from. What relies behind that lower raw material price expectancy. In that way, we enrich a forecast, and we might also get to learn from the future, when it becomes the past (which by the way, will always do). By doing this, we might develop alternative plans for different scenarios. What if this and that doesn't happen? How might we still hit the goal?

And what about the present? The game is played today. You cannot change the past. You can affect the future, but only if you do something today. In this regard, I believe that there are three key aspects where companies can build a strong competitive advantage (or a structural disadvantage):

1. Daily operation: do processes run smoothly or do they block most of the time and people need to intervene to remove obstacles for day to day stuff? Do the people that need to solve the problem have the tools to do so?
2. Decision making: do people know who needs to decide what and when should they do it? Agile and efficiente organizations assign clear responsibilities and delegate the decision where it is more efficient to be made.
3. Information flow: this is key to deal with 1) and 2). Do people have the information they need to have to do their job well by the time they need it? Do they spend too much time gathering that information? Information flow is key to resolve daily problems, to anticipate with the right alerts, to adjust decisions made. And if you can do this in real time, you will do it much better and much more efficient.

I believe that some times these processes are underestimated. Understanding the underlying power of it is undoubtedly the first step to change them. Even after that, changing these process can require a big effort as it is extremely hard to measure its payback. You need to learn in what activities your people spend most of their day. You need to think in what activities do you want them to spend their day. If you don't know, don't care. Sometimes, it is easier to understand what you should not be doing rather than what you should do. That should be easire. And you can start from there.

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