Business Decisions - play them forward three hands

Many strategies and decisions are made "in the moment" - considering only todays issues with little thought given to the flow on effects or impacts.

Consider for a moment what this could look like in a practical business context;

Problem: Business is going well with a large volume of short term contracts driving the existing business resources very hard. 

Solution: Hire some additional staff to do the excess work - problem solved!

At a high level the problem is solved, as the problem of having too much work for the existing staff has been covered by bringing in some additional staff resource to complete it.

But.....lets pause for a moment and consider the flow on effects - or if you prefer, lets "play this forward a few hands". 

If the first hand was to hire additional staff, then let’s consider the second

With the influx of additional staff into the business you now need more space and most likely, more equipment - anywhere from desks and chairs to computers or machinery. After all, there is no point having more staff unless they can be productive.

Considering the third hand, this additional investment in staff and equipment has a "cash" cost to it, so you need to be able to fund this - ie. cash, capital or debt. Can the business raise this additional funding, and if so, how quickly and at what cost? From a finance perspective I have seen a lot of needless pressure and cost added at this stage, simply because it was not considered early enough.

Whilst this is a very simple example, you can see clearly how the "obvious" decision to hire more staff had several flow on impacts which also need to be considered. Regrettably, many decisions are made on the immediate issue only, with no up-front consideration of the impacts. In this example, items such as the floor space, equipment or financing will all be confronted at some point - but generally after the staff are hired and in the building. At which point - with the additional pressure of having the staff wages already accruing, the quality of the consideration of the other items is compromised - with expediency frequently the key driver.

If this example does not resonate, then consider a couple of others that I have seen recently;

  • 1. New manufacturing press - 2. more power/substation required - 3. downtime to install (significant loss of production time)
  • 1. New sales tracking software - 2. new phone handsets (across the full sales force) - 3. renegotiate (at cost) the existing phone plan
  • 1. New accreditation level - 2. new checking/review process - 3. massive new staff need (at considerable cost)

A Personal Challenge - briefly revisit the decisions that you have been involved in over the past week and challenge yourself as to whether you gave sufficient consideration to the downstream  impacts - and then if you had, whether you would have made the same decision!

An Effective Solution - moving forward, when you are faced with an operational or strategic decision - play it forward three hands - considering the now, the next and the one after. This does not need to be lengthy or time consuming process, but by instilling the discipline of at least considering the next two hands - you will make more considered and better quality decisions overall.

For further information or assistance with this topic in your business, contact us today to arrange for a preliminary consultation.