Friday, December 27, 2013


You must perform excellently in business in order to stay in business. And it is very helpful to be able to quickly assess progress, to see how you’re doing - to know if what’s happening is going according to plan or not - so you can make course corrections, steer clear of pot holes, swerve around obstacles, take advantage of the fast lane, and drive your business on down the road to providing customers and clients with better and better products and services, and to generating more and more personal financial rewards and experiencing all the success that goes with doing that.

An obvious benefit of measuring your performance is to learn where you are struggling. If you operate your business from a budget, against which you are performing monthly variance analyses, you can see where your results are not meeting your projections.

The numbers paint the picture. You might conclude that your financial projections were too optimistic, that you bit off more than you could chew. You might conclude that your performance - your personal business behavior - is subpar and that it needs some minor adjustment or a total overhaul. You might determine that you are overspending, perhaps using marketing tools that are not generating enough sales. You might determine that you are taking on too much debt leading to more debt service. You might determine that you have a cash flow problem, that perhaps you are not collecting money that is due.

Over both the short and long term, consistent measurements can serve to help you identify your strengths and weaknesses so you can decide to modify your business behavior, put additional controls in place, or initiate other remedies to strengthen the performance of your business.

However, with all analysis there is a big caveat. When you are endeavoring to make some sensible conclusions - so you can grow your business and perform even better - by connecting the result of your monthly budget variance figures to human behavior - the doing of the tasks that produced the numerical result you see in the analysis - is there any real causal certainty. Is it possible to really know HOW you achieved a particular result, or WHY you did not?

To get some useful clarity on this question we must take a tangential turn and delve into philosophy just a bit.

Here we go. Big Fat Truth: The inside of your own mind is the only thing about which you can be sure and certain. That is where you know for sure and for certain that George Washington was the first President of the United States. You know in your mind. In fact, every bit of what you know is based on your experiences and thoughts, feelings and sense impressions. That’s it.

Whether you see it in a bank statement, or on a spread sheet, or in a stack of past due bills, the “facts” are in your mind, not in a piece of paper you hold in your hand, or in a computer document.

Some really smart people say we do not really know anything. We just somehow come to believe things. Our lives - and everything about we say and do in our behavior - is perpetuated upon finely-tuned beliefs made subtly over time. Everything we have ever known has been done before, been repeated precisely, or been changed slightly or radically, and then redone a bit differently, either by us or by other people. There is no evidence to prove that we know much of anything. There is no evidence to prove that we even know who, or what we are, because everything that we have ever learned has been made up by ourselves - based upon BELIEF.

So, back to where the old rubber meets the old road and to the reality of operating your business and calculating the consequences of your endeavors to make a buck or two - sure, measure all the stuff you feel you must measure, all the key variables smart people and well written books say to measure - but remember the truth. When it comes to making rational conclusions and forecasting what to do next based upon them, there will always be a lot of guessing going on - always, because no one can ever know anything for sure and certain. We can only believe we know HOW or WHY something happened, or did not happen, or might happen again.

By all means, please measure and analyze performance Do it because there’s no better way to “know” and no better data upon which to set future goals as you make or remake plans and move ahead in your business. Them's the facts Jack. 

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