When Results go Bad!

When Results go Bad!

It is interesting to watch different leaders and their reactions when the financial results don’t go as they had planned. Those with financial backgrounds usually have a knee jerk reaction and start a severe cost management process. The old adage that you can manage cost but not manage revenue is key to their leadership talent (i.e., you have control over expenses and not revenue).

In some cases, this might be appropriate because there is a fundamental change to the revenue stream and the expenses need to be in line with the projected revenue. However, many times, the “baby gets thrown out with the bath water” because these cost management controls are also applied to areas of the business that has more revenue opportunity (it’s a growing business). To obtain those revenue opportunities, this business needs to be fueled with investments, either people or other resources. Consequently, the leader(s) are causing their own demise because they are not fueling future revenue growth where opportunity exists. Instead, all business units are treated the same way . . . Watch Expenses!

With a public firm, the focus seems to be on the monthly results, or more importantly the quarterly results . . . this short term focus is frustrating to many because it does not always align with doing what is best for the long term interest of the firm nor what is best interest of the clients.

It is those leaders that can balance those short term needs with a longer term vision that are most successful. Short term cost management is not a long term vision (you will never be successful in just managing expenses). Therefore, as a leader with no thoughts on future vision, you are left with all of you know, which is try to manage costs in a time period where results are not what you planned. Consequently, only one thing will happen, that leader will no longer be in their position as it is a question of just when? However, in the meantime, shareholder value is destroyed and opportunities are lost.

Be a Leader with a long term vision!