Risk Insights
July 30, 2019

Business Isn't Just a Numbers Game

Employees monitor financial data on their computer screens as they work the brokerage in London in 2019

With the launch of Stratfor Worldview Enterprise, business leaders from a variety of backgrounds share their opinions on geopolitical risks and business strategies.

In this blog post, Founder and CEO of Khorus Software, Joel Trammell, discusses the importance of leadership and mentoring as a path toward business development. Joel Trammell has spent decades as a startup launcher and CEO. He has focuses on working with current and future CEOs to maximize their performance.

When I started my first business over 25 years ago, I would've told you that business is a numbers game. As a degreed engineer whose father was a college professor, I was exposed to many mathematical concepts and analytical approaches. I thought all you had to do in business was gather the data, apply the math, and voila! There was the answer.

After 25 years of running companies, I will tell you that numbers are mostly just the result of a bunch of little actions people take every day in your company. Business is about people. And most business problems are people problems. Improving a business is therefore accomplished not by looking at numbers but by changing the behavior of people. And that is very hard. My wife moved the drawer where we keep the utensils in our kitchen over a year ago, and I still sometimes reach in the wrong drawer. No wonder it's such a difficult task to make large-scale changes across an entire organization.

Business is about people. Improving a business is therefore accomplished not by looking at numbers but by changing the behavior of people.

Matt Blumberg, the founder and CEO of Return Path, uses a great metaphor for this concept. He describes knowing all the detailed numbers of the business as the ability to read a map. Knowing how to actually manage human behavior and drive is something different and just as important — it's like being able to drive the car. Writes Blumberg, "Being right about what roads to take is a lot less important than actually getting yourself to the destination safely and in a timely manner."

For leaders, especially the technical and left-brained among us, it can take years to grasp this truth. Creating a massive spreadsheet and crunching all the numbers can give us a comforting sense of being in control. But no matter how neat your numbers-driven solution is, people are messy. If the leader can't drive the car — i.e., can't lead, manage, and coach people toward the solution — what's the point? In my experience, it's almost always on this people side of things that plans break down and strategies go unexecuted.

Especially in the era of knowledge work, leaders must factor in the more nebulous, hard-to-control aspect of managing human behavior.

Even worse, divorcing numbers from people can even lead to catastrophe. Look no further than Wells Fargo's notorious 2016 scandal in which employees created over 2 million fake customer accounts in order to game the bank's incentive structure. Wells Fargo CEO often repeated the mantra "eight is great," meaning that employees should strive to sell each customer eight Wells products. For Stumpf and the creators of the incentive structure, this program, encapsulated in a number, must have seemed a logical way to grow revenue. But they didn't factor in the human side of things. They failed to ensure that this program was positively changing employee behavior on the ground.

Certainly, knowing the numbers and doing quantitative analysis is — and will always be — an essential component of running a business. But especially in the era of knowledge work, leaders must factor in the more nebulous, hard-to-control aspect of managing human behavior. As management theorist Douglas McGregor told us decades ago in his brilliant book, The Human Side of Enterprise, "The ingenuity of the average worker is sufficient to outwit any system of controls devised by management." In other words, even the smartest numbers-centered plan can be derailed if it doesn’t mesh with human actions and motives.

What does this mean for executives? It means, first and foremost, ensuring that your organization has managers up, down, and across the organization who understand the CEO's goals and have the influence required to encourage their employees to actively support those goals. With that powerful combination —having the map and being able to drive — your business is far more likely to achieve its objectives.

Business is only partially a numbers game. More and more, it's a people game, and the best leaders of the future will act accordingly.

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