Am I Wrong Here? — Dickeson
After more than a year of offering my book “Monday Morning Manager” free on e-mail request in this column I’ve sent out almost 400 copies. Have I changed one mind? Not so far, as I can tell. Has one single printer stopped using budgeted hourly rates to set prices? I don’t think so. Has any software supplier begun using weekly reporting of financial results for a printing company? I don’t believe so. Please tell me if I’m wrong.
Am I discouraged? Is it time for me to shut up and quit? Not as long as I have breath, a keyboard and a willing publisher! Let’s look at a few facts. Here’s what we know at this moment.
We cannot predict or forecast with accuracy. There are just too many variables in our business or any business. Small variations always lead to surprising, unexpected, results. This is true in budgeting, inventory management, production, pricing, cash flow—almost any aspect of business you can name. Call it the Chaos Factor.
Knowing the Chaos Factor, to persist in “budgeting” and relying on budgeted hourly costs for a price is like beating our head with a rock because it feels good when we stop doing it. But we do it anyway. Tell me why.
Predicting Results
To manage is to control. To control is to forecast a result from a cause. We have, at the moment, one statistical tool for forecasting results. From it we can call a result either “noise” or a “signal.” If it’s “noise” we attribute it to the Chaos Factor resulting from the usual barrage of unanticipated results.
If it’s a “signal” we shout “Eureka” and leap like Archimedes from our bathtub to discover the cause of the “signal.” We study and fix the causes of aberrations that provoke “signals.” That’s how we improve the process—fix the causes that are signals, ignore the distractions that are noise. (Alas, many of us still run about like mad dogs and Englishmen in the noonday sun trying to fix noises.)
