I can’t tell you how many times I have kept myself, my team or my business group out of trouble by doing something as basic as simple math. You know, adding, subtracting, multiplying and dividing. The sort of math that we were all supposed to learn starting in elementary school. It seems many of us think that we now have computers or other people who are responsible for this sort of activity. In just about every business that I have been in, it has always been brought home to me that knowing and understanding the numbers is everybody’s job. In almost every instance where this tenet has been forgotten or ignored, things have turned out badly.

I think part of the issue may stem from the fact that we don’t seem to use real numbers anymore. In the spirit of speed, or simplicity, or possibly laziness, we leave all the appropriate zeroes off of our numbers when we work with them for business. So now when we are working with say, twenty four million, six hundred thousand dollars (a reasonably large sum by just about any standards), instead of writing out $24,600,000 we put down $24.6 M. I know and you know they mean the same thing. However, I probably have $24.6 in my wallet. I know I don’t have $24,600,000.

Perhaps this trend has promoted a more relaxed attitude toward the numbers. Twenty four point six as opposed to twenty four point seven is only point one difference, right? It’s a rounding error. In reality its one hundred thousand dollars. How many more people could you hire or what more could you do if you had an extra hundred thousand dollar rounding error in your budget or in your wallet?

This example is just one of many possible reasons why people and businesses may have evolved this tendency toward what seems to be a more lackadaisical view of the numbers. There are probably many more. The point here is that the numbers and the math behind them represent the scoring system for the business game. It has been my experience that business eventually always boils down to the score.

In most other games you get to start tied with your opponent at zero and start counting upwards. The scoring only goes one way. Those that score the most usually win. The one exception that comes to mind here would be golf. It seems I never miss the opportunity to mention golf. In golf everyone starts at zero and starts counting and it is the one with the lowest score that wins. The point here is that you cannot do worse than zero. That is not the case in business. In business you can in fact end up with less than you started with.

This is called a “loss”, as in you have lost money.

Here in comes that math thing I mentioned at the start. Not only are there things that add positively to your score (this is called “Revenue”) unlike other games, in the business game there are things that can be and are subtracted from your score (this is called “Costs”). In sports you have a “loss” if your opponent ends up with a higher score than you. In business you end up with a loss if costs you more to provide your good or service than you get paid by customers for the good or service.

Here’s the kicker: the numbers don’t lie.

Bill Parcells, the famous football coach is credited with the following quote, when asked if his team was actually better than their record indicated. He said: “You are what your record indicates you are.” If you lost ten games and had a losing record that meant you were a ten game loser with a losing record. It didn’t matter how well you played. The numbers didn’t lie.

Any time you are looking for ways to improve your or your team’s performance, start with the numbers. Do the math. Look at the revenue (value) that you or the team generates or is responsible for. Don’t generalize regarding what you affect. Don’t try to take credit for associated work. Don’t claim “enablement” of someone else’s revenue. Be specific. Math is about specifics, not generalizations. Games have specific scores. Look at the costs you or your team generate as well. These are going to be the reductions to the score. You can’t hide them. They too must be figured into the score.

Leadership is about recognizing what needs to be done before it needs to be done.

Anyone can recognize that something needs to be done when the score indicates that the business is losing at the game. It is the leader who will have already done the math that will anticipate that something will need to be done. They will plan for it so that they can take full advantage of any potential opportunities and minimize and mitigate any potential risks.

The math is really pretty simple. If you want to change the business score there are basically two things you can do: Increase the positive score (revenue) or reduce the negative score (costs). Just about everything you can do to affect the business will fall into one of these two categories.

The usual seduction occurs when the manager focuses on only one or the other category. It is very difficult to grow an unprofitable business into a profitable one. Costs tend to grow along with the growth in revenue, hopefully at not the same rate, but they do grow. If you started out unprofitable and tried to grow without changing anything else, chances are you would still be unprofitable after any growth.

On the other hand it is impossible to cut costs all the way to prosperity. You can reduce costs to profitability (hopefully) but you cannot reduce your way to growth. However, a business left unchanged will continue on in the same direction, in the same manner that it has before. I have referred to this phenomenon in the past a business momentum. There have been too many instances in the past of managers not taking or delaying appropriate actions on the cost side in either the hope or expectation that something would change of its own accord.

It usually doesn’t and the score only gets worse.

It takes both the “pluses” and the “minuses” to change the score in a business. It takes looking at what has happened and using it to anticipate what will happen next. It takes the numbers. And if you are going to utilize the numbers you are going to have to do the math.

Investment firms have a wonderful disclaimer that states that past performance is no guarantee of future success. This is true. However in business it is a good indicator that without a change to the elements that make up that business’ scoring system on both the plus and the minus side of things, of what can be expected. When you start changing the factors that affect the score, you definitely need to first do the math.