Numbers Can Lie – Only If You Want Them To
Good sound business decisions require a reliance on the
facts. I may be stating the obvious here but I am amazed at just how the truth
gets overlooked for one reason or another. Unfortunately, in the absence of good
solid data growers and processors may only be left with gut reactions to guide them.
In talking with growers over the years I have found that
operating within a comfort zone is much preferable to changing practices,
procedures or operations that may not be “optimum” as a means to achieve
financial success and continued growth.
Anecdotal Evidence
Years ago I had a grower, one of our premier AgStar
customers, talk to me about the ongoing debate that he was having with his
father on the topic of equipment “maintenance vs replacement”. Buy new or keep fixing?
He went about setting up each of his large (tractors,
trucks, implements, harvesters, etc.) iron assets as cost centers. Every belt,
alternator, nut, bolt, along with each hour the shop folks spent fixing that
unit was applied to the enterprise called “JD4840 #1” or other such rolling
stock designations.
At the end of the first year of diligently recording each
and every expenditure to individual equipment items he sat down with his
father and had a discussion about whether or not it was better to buy new or keep maintaining the old and fully depreciated capital items.
Since the majority of new purchases came with an extended warranty most repairs
would be covered entirely by the dealer. So the primary cost of new vs old was in the depreciation of those units.
Oh? So who was right about costs? Suffice to say that the patriarch
was astounded at the money that they were investing in aging equipment. I saw a
lot more shiny new tractors the next time I stopped by the farm.
Kareem Abdul-Jabbar and Coach Riley
Years ago I remember reading in Laker Coach Pat Riley’s
book, “Showtime”, that in an effort to continuously get more out of his super
stars he would have game recap private chats with each team member about what
they needed to improve in their game.
Sitting down with Kareem Abdul Jabbar typically resulted in
some frustration on the part of each of them. He would actually get some push
back when he would suggest that the famous center needed to get back sooner on
defense, push the ball up more for fast breaks, make a few more passes, and
guard the paint more or a multitude of other such suggestions for improvement.
Finally, the big man let his coach know that the
conversations weren’t useful because he didn’t have any facts to back up his
position. This was a time when basketball maintained the usual stats of shots taken, makes, rebounds
(defense and offence) , free throws (attempts and makes), and points per
game. Beyond that there were few stats on other important indicators of
performance. Riley then hired an assistant whose only job it was to record more
events and crunch the numbers in advance of his “chats”.
You Can’t Handle The Truth!
As companies grow the need for good accurate information is
critical for those owners and executives far removed from the day-to-day events. Action driven by intuition
can result in success only if you are truly a person who has been blessed with
incredible luck. In time that good fortune will run out, however, and one is
best served by simply flipping a coin in the decision making process. Good luck
with that…..
