Management Is Prediction –Dickeson

Managing means predicting. When we say, “Until you measure you can’t control,” we’re really saying, “If we don’t record the past we can’t predict what’s going to happen.”

If we haven’t kept track of what we’ve spent for wages, salaries and social benefits in the past, we can’t project those expenses for the future. If we haven’t accounted for production time, we can’t predict delivery dates. The better we predict, the better we can manage.

From ancient times we’ve sought to predict what will happen. We’ve consulted an Oracle at Delphi, read Nostradamus, looked at the stars, listened to politicians, weather forecasters and stock brokers, and watched our computer screens. Still, the ups and downs in our past experience seem to defeat us.

We haven’t yet learned to cope satisfactorily with variance, have we? If a company announces that profits will be off a dime a share, their traded stock prices take a dive. We’re disappointed despite knowing that such variations will happen. Past experience just isn’t linear. It bobs and weaves. Economists can’t predict the nation’s surplus or deficit for the next fiscal year, yet we argue about tax policy based on a 10-year forecast! Silly.

Shall we throw in the towel? Concede that we can’t reliably predict and, therefore, we can’t manage? No. We must adjust to the realities of variance as best we’re able. We live with only short-term weather forecasts. Five-year business plans are tales told by Sheherazade.

We’re well aware that a financial plan for a year is shaky. So, instead of a year, how about quarterly planning? Or perhaps weekly planning? The shorter the time interval ahead, the more clearly we can foretell.

Reducing our predictions from 12 to three months would increase reliability of our forecasts and make us better managers. Better still, why not report by rolling 13-week quarters? Add the latest week and delete the oldest week every week. See results of the prior week at the start of the week following.

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