Do businesses know how many customers they serve per minute? What is the profit created per minute of operations? When the C-suite is lost, the quickest way to find itself is to return to this insane obsession about the numbers.
I still remember him, that one technical director. I was working under his wing. To win his trust, you had to know your numbers off the fingertips, to the exact dot. Not estimates, not assumptions, but the actual number.
Initially, all this seemed as rigorous work, keeping all these numbers in the head, unsure about which one he would pick on. Now that I am older, when I look back, I realise that something that has gone missing out of boardrooms is this penchant for numbers. Because the numbers do not lie, they are the most neutral object in the business world.
Above all, that devil is always hidden in the numbers. Whereas one board will report growth based on EBITDA, another will report growth based on Operating Margin. When it comes to unit costs, once again, more facts are revealed. Nothing screams louder than the unit cost of anything. If a company calculated profitability per employee, again, that is a number that will reveal a hidden story.
But, how do you know what number matters? What number to track? What number should be on the fingertips? It is one thing to have the numbers, it is another thing to have numbers that drive business growth.
For some numbers tell you a story of the past, while others tell you what kind of future you can expect.
A common futility is tracking a number for the sake of tracking it, surely, some numbers are not worth holding in the head, for they tell you nothing about the business. They are good to know, but they are not must-nos.
But the point is clear, there is a much-needed renaissance in most C-suites, having discussions than run more around the number and less around the executive gutfeel. Do businesses know how many customers they serve per minute? What is the profit created per minute of operations? When the C-suite is lost, the quickest way to find itself is to return to this insane obsession about the number.
Numbers are not something to be left to the CFO and the CEO, numbers are for everyone that enters that C-suite. The numbers surely do not lie.
Cash is king, but are your suppliers alive?
One of the metrics that businesses love to track is the Accounts Receivables and Accounts Payables. Ideally, the goal of any business is to ensure that your customers pay you faster than you are required to pay your suppliers.
With the learnings of the pandemics, businesses learned that nothing is as precious as cash. Cash at hand, cash in bank, anything cash and its equivalents.
Thus, businesses decided to elongate their payment terms. Those that paid suppliers after 30 days upon receipt of an invoice moved to 60 or even 90 days. What better way to make more money using your suppliers’ money.
But Newtonian thinking applies everywhere, for every business action, suppliers developed a reaction. They learned to factor in these payment terms in their pricing, they factored in other aspects such as invoice discounting.
All these interest rates got factored in, not forgetting the ‘black tax’ in most organisations. In the end, it came back to bite organisations, suppliers either compromised on quality or inflated the quotations.
Yet, there was also a group of suppliers that got stifled out of the game, they could not compete since winning bids is also about who gets to underprice best. Most suppliers got choked, as they ran out of operational funds. The few suppliers that managed to make it through this fight hit stagnation. Often, one hears about suppliers that have not grown despite all the years they have spent dealing with the ‘big’ organisations.
Did the Accounts Payable, and cash conversation come at a disservice to these suppliers? This is where the sustainability conversation comes in. Are businesses truly sustainable if their suppliers that been grounded by long payment terms? What is the long-term effect of such payment terms?
Parting shots
Thus, as the business chases the big number, it is also prudent that the ‘number’ does not harm some stakeholders in the process (customers, suppliers, employees). It is to raise the alarm on a prudent pursuit of the number. To go back to the adage, it is not just what the business does or achieves, it is also the means it employs to achieve those results.
But to also state the fact, these two facts are not contradictory, they are mutually reinforcing. The business can have a great love for its numbers, and equally a great love for its stakeholders (in this case, the suppliers).
How does the C-suite evolve into a place where each party keeps the other honest to the facts? Honest to the numbers? And honest to the impact of those numbers. How do we chase the number while ensuring that no harm is done in the process? Executive Prudence reigns..