Lesson II – Garbage In, Garbage Out
In my last note, I discussed the first lesson I learned during my 18-year wrestling career that I apply to business – how numbers drive performance. The second lesson I want to share is the fact that you can only get out of your efforts what you put in. And this lesson starts with the fuel wrestlers rely upon – food.
Like food for the top wrestler’s instrument (the human body), data is the lifeblood of business. One can generally distinguish a successful wrestler from other students in your average high school cafeteria. The wrestler is the one reluctantly downing fruit or a salad.
The average weekend athlete performs well on 2,400 – 2,800 calories; whereas the average Olympic athlete can consume as much as 10,000 calories daily. High-performing athletes consume low fat, high calorie, and high carbohydrate diets to store energy needed for practice and competition and to build and maintain lean muscle mass. The challenge for wrestlers is they must find a way to generate commensurate energy on a fraction of the caloric intake as the typical Olympian.
Wrestlers need to understand the optimal type and quantity of foods they must consume to generate a certain amount of work-out energy. They must also know the cost (or weight) of each type of food. I, for example, I came to understand that the average-size banana would generate an hour of energy and reduce the likelihood of muscle cramps in return for a 1/4 pound of incremental weight. For wrestlers, more than any other athlete, consuming the wrong foods will almost assuredly lead to disaster. Too much food adds too much weight compromising the ability to make weight for competition. Similarly, snacks and other fatty foods offer hollow calories and don’t replenish the body with the necessary nutrients and electrolytes required for peak performance.
Businesses, whether simple or complex, benefit greatly from the assembly and astute analysis of data.
Success in leveraging performance metrics to drive one’s business is predicated on the availability of timely and accurate data. It is worthless to understand that your critical performance metric is “profit per employee” if the cost data on which profit is calculated is inaccurate.
In the late 1990’s I worked for a client whose production cost data was out of date and understated. In an effort to protect market share, they had reduced the price of select product lines. The price reductions, while driving revenue, had a more severe impact on liquidity than senior management anticipated. The liquidity crunch was not just a function of their pricing decision but more a result of the inaccuracy of their fully-loaded product costs. After an intense effort to analyze and reset their cost standards and remap their product cost systems, the management team was able to better price their products, protect share and margins, and eliminate their liquidity issue.
Be a zealot for accuracy at the lowest level of your data tree; for this will ensure the key business drivers, performance metrics and, ultimately, your strategic decisions are well informed. Don’t forget – garbage in, garbage out.