The best business operators know there is nothing magic about January 1st


Among the many small mistakes made by many business leaders that lead to very big damage is the idea that January 1 brings great power to defy all laws of economics, physics and science. nature. It’s as if, for many, the crystal ball that falls over midtown Manhattan each year contains magic – magic that allows, among other things, huge jumps in income and execution rates. overnight profits.

Because how else to explain the budgets drawn up in so many boardrooms across America that call for huge jumps in sales, gross margin, EBITDA or whatever from the fourth quarter of a year to the first quarter of a year. ‘Next year ? Examining many of these plans, I was left only to conclude that those who drafted them must have believed that New Years Day brought with it some sort of power from another dimension.

Otherwise, why wouldn’t a rational businessman make sure his budget process ensures that execution rates in one quarter match those in the next quarter? Failure to do so will result in the creation of cliff top events, where, when viewed visually, a vertical line appears on Day 1 of a subsequent period to aid in budgeting for the extraordinary and planned growth of the following period. Not only are such budgeting acts poorly designed, the subsequent achievement of budgeted goals is almost impossible. Indeed, to achieve a significantly higher execution rate during a subsequent period, it is necessary to be on this execution rate at the end of the previous period. It’s just math.

It’s all well and good to declare some growth target for the coming year, say 10% from the previous year. But wise leaders always make sure that the budget line for that growth realistically connects to their current execution rate line on the day they make the plan. Doing things differently almost always results in a cliffside event and hopes for a certain amount of magic from the Waterford Sphere.

Cliff events are easily visible on paper. They can be seen by anyone in your organization and can be extremely demoralizing. They inevitably lead to plan hiccups that are hard to recover from and often cause people to give up before the game has even really started. When people feel that there is not much to play, they simply stop playing. Cliff events have this effect on teams. They also create a division between the rulers and everyone else, as everyone sees them as calculated moves, even Machiavellian ones, to avoid paying bonuses, commissions and other risky compensation. But these messes are completely unnecessary. Because there is nothing magic on January 1st.

The best operators know this. They take care to include their teams in the budgeting process and ensure that execution rates always line up from quarter to quarter. By doing both, these leaders engender confidence among those they lead, while creating businesses that thrive in a sustainable manner; because they grow thoughtfully – without the aid of magic balls, 12 grapes, or any other hopeful tradition – simply selling a little more on January 1 than the day before.

The opinions expressed here by the columnists of Inc.com are theirs and not those of Inc.com.


Comments are closed.