Stop treating “Output Variables” as “Input Variables”

Increasing the target and expecting a different result, who in management is not guilty of that? We have all done it. We treat an “Output Variable” as an “Input Variable”. Don’t get me wrong, top-down targets are an essential part of financial planning. They determine the “Perfect Equilibrium” between Growth, Investments and Profitability.

But a top-down target is an “Output Variable”. It needs to be followed up by a bottom-up plan which is the proof point and creates a “Go Get” or a “Hedge”. Either way management must adjust the target by adjusting the growth assumptions, accompanied by investments or restructuring, or accept the worst outcome, less profitability. Once the “New Equilibrium” is set, the path to implementation needs to be created. A Budget without an “Execution-Plan” is a Hail Mary! It might work out, but more often than not it won’t. Turning the bottom-up into an “Execution-Plan” requires management to answer the question “Who does What When How”, the “Input Variables”, for each defined target. Once that is done, the real work starts. Execution!

How does Management support execution? By measuring and reviewing progress made on the “Input Variables” in the appropriate intervals. Daily, weekly, or monthly but not quarterly or annually. The purpose of these reviews must not be to ask “Why Didn’t You” but rather “What Do YOU Need”.

When your “Input Variables”, the “Who does What When How”, become your focus as a management team, the “Output Variables”, Growth, Investments and Profitably become reality. That’s the secret sauce to “Creating Value” as a management team! That’s what “Servant Leadership” is all about!