Why leading by numbers doesn’t work - this does.
Photo by Lucas Blazek on Unsplash
Better numbers don’t produce better numbers. That is obvious (hopefully!)
There are leaders out there that believe that by focussing (at times relentlessly) on the bottom line will improve the results. Graph after graph, report after report, teams analyse their margins, top line, bottom line – all in the hopes that this focussed number analysis will produce the improvement needed. Or that somehow this exercise will produce understanding of importance and managers will then place more emphasis on it with their teams.
When I see this behaviour it tells me something very important about the leaders in that business – that they don’t understand what really drives those numbers.
Behavior is what creates and influences your numbers.
This is a universal truth in all business. Even in business where cost of goods is driven externally, behaviour within your company drives how you interpret and set your margins.
Don’t get me wrong here, I am not saying that numbers aren’t important - they are, without them you have no business - its the expectation that focussing on them will change them.
My experience in the casino industry - where casinos operate hour by hour on their win/loss margins - is a great example to use to illustrate this truth. (simplified for practical reading)
A casino makes its money off of set win percentages on each game offered to players. The odds a bet pays are set to the casino’s advantage meaning that even if you win every hand on a blackjack table, the actual win payout you receive is not based on the true odds of the hand, the casino has taken a sliver and pays you slightly under what would be true odds of winning that hand. This is how they make money. Simply stated, over the course of 365 days in a year each table game and slot machine will yield a win percentage that is set according to the odds paid.
Casino managers and supervisors are tasked with overseeing the games to ensure they are being dealt correctly as this is what secures the win percentage and keeps the games from being compromised in any way.
As you can imagine with games of chance this is sometimes a harrowing ride for managers. Table win/loss statistics are tracked hour by hour. There are days where the casino will suffer heavy losses even though the percentages are in their favor, this is because the percentages are realized long term, not on a daily basis.
Even so, there are still things that you do when a game is losing heavily to ensure that everything is secure.
The first is making sure you have a dealer on the table who knows how to deal well. That means they are dealing at a strong pace for the table skill, they are accurate when they payout and they shuffle the cards by procedure repeatedly. At the same time, you assess the players – is there a cheater or card counter, is there anything odd going on with play.
If all those things check out, there is nothing you can do to affect a different outcome to that table. It is losing and that happens from time to time, it is what brings players back to play over time.
If you have dealer who is not dealing well or is making a lot of mistakes, at the next dealer break you would put a stronger dealer on the table to continue. Often this will yield some improvement on the win percentage, but again, you will still have times where this has no effect.
The win/loss numbers are tracked hourly so the managers know how they are doing at any given time to ensure there is always enough money at the cashier to pay winners out.
It’s the dealer’s skill level combined with payout amount that produces the win percentage on a table. Some managers get nervous and focus solely on how much the table is losing. They will randomly change the dealer and supervisor and hope that the losing streak stops. I’ve even seen managers go as far as putting luck charms on a table thinking somehow that will make it work out!
Luck has nothing to do with it and hoping it will ‘work out’ misses a very obvious, actionable assessment opportunity – What are the behaviours driving the production of that number?
The answer to this is all that matters.
This is the place to focus attention and analysis.
Numbers are a result measure of a set of work behaviours.
Those behaviours are influenced by things like company policy, software processes, market conditions, and cash flow restrictions but again, all of these influences reduce to behaviour (in these examples it would be response behaviour).
Focussing on the importance of margins should be positioned as the why, not the how and what. What you do and how you do it is why you get a result. How that relates to focus time in a meeting for example would look like 10% on actual numbers, 80% on behaviour analysis and action(s), 10% decisions needed to remove barrier(s) or anomalies for behaviour to proceed as needed.
A leader walking out of a meeting like this will have a much clearer way to improve their results with their team, which ultimately creates engagement from employees because they know how to adjust their own performance to achieve better results for the company. Everyone wins.
So next time you are prepping for a meeting to review revenue or P&L numbers, check your focus point – are you pointing your team towards the numbers themselves or actionable analysis by looking at the behaviours that are driving them. If you or your team is not clear about what those actual behaviours are, that would be the place to start.
Looking for ways to shift your leadership focus? Learn more here.
