Lesson III – Refracting ‘Costs’ Through the Right Prism
What costs have you incurred to get your business where it needs to be? Throughout my 18-year wrestling career I regularly took stock of the costs of being a champion. And it is a lesson I apply in my business career, as well.
One day, somewhere back in the 1980s, I found myself 12 pounds overweight with weigh-ins for a regular season competition only hours away. This challenge called for my most aggressive weight-loss program, which included an extreme two-hour indoor workout followed by a 15-mile run. The problem was that my only option was to run outside and the temperature was 20 degrees below zero! The cost: frostbite on my left hand and with it the near loss of my middle and index fingers.
Fast-forward a few months later and I find myself losing by one point with 30 seconds remaining in a championship match. I was the returning state champion and had not suffered a single loss in more than a year. During a break in the match, in a flash, the frost-bite run and all of the other extremely demanding workouts I’d endured came back to me. Had I suffered all of these pains in vain?
If I viewed these painful workouts as “costs,” perhaps these experiences would have been in vain. Thankfully, I considered them as “investments” which differentiated me from my competition. The amount of investment I’d made in my success bolstered my mental strength and rendered losing an unacceptable outcome. If I had invested little in my training, I could’ve very easily just given up and lost the match.
In my dealings with my clients – Fortune 1000 finance executives and Private Equity principals – I’ve noticed a curious (yet familiar) divergence in perspective which often generates commensurate results. When faced with a business challenge that requires outside assistance, one set of my clients consider consulting and interim financial management solutions as “costs.” The natural inclination is to minimize cost; however, the latent risk in this perspective is best described in the “you get what you pay for” dynamic.
Managers who opt for the cheaper solution often get sub-optimal results which, on occasion, result in even higher total costs than if they had selected the optimal solution from the start. Their focus is on cost as opposed to results, and the flaw in this view, often bears out. In fairness, this dynamic is not their fault but is, instead, a function of having to work within limited and often inflexible budgets.
The other set of clients view outside advisor and interim management fees as “investments” and focus, instead, on applying the right resources, methods, and tools against the challenge. Concomitantly, they emphasize return on investment (ROI). This perspective focuses the client on that which is most important, the end result.
Take care to calibrate the lens through which you view your business investments, no matter the scale or strategic import of the core issue at hand.