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Numbers can sometimes be misleading

As a consultant, I was taught to quantify things while giving recommendations to the client.

Here is the reason why – Imagine I am giving a presentation to my client and I tell them the same thing in two different ways:

First, there is high chance you would be generating more revenue as the market is also growing very fast.

Second, your company’s sales increase at average rate of 4% for 8% increase in the market growth. Since research shows that the market will grow at the rate of 8% next year, your sales is most likely to increase 4% next year.

Out of the two, which one do you think is more convincing? Obviously the second one, right? From the second statement, the client has the reason to believe WHY they can expect more Sales!

Hence the consultants heavily rely on Math while drawing conclusions. While math might be true, (if done correctly) it may mislead. Here is an example to illustrate the same. Let’s assume the Revenue of a company to be 10 Million. The immediate reaction would be that, the company is doing well. Do we have sufficient data to recommend it is good? What if the COGS to get this revenue is 11 Million. In this case, the company is suffering a loss which is bad. Hence the revenue of 10 Million alone is not sufficient enough to say whether it is good or bad. OK. Let’s assume Net Income of 1 Million. Math tells the profit margin is 10%. Now, 10% profit margin is good or bad? Again I would say the data is insufficient. Why? What if the profit margin of our company was 17% last year.  In that case, the client’s profit margin is good, but not as good as last year. However, still the data is not sufficient to say if 10% is good or bad because we do not know the profit margin of the competitors. What if the profit margin of competitors is 7% this year.  It means that the entire industry is not performing well and though our profit margin has decreased, our market share has remained constant or it has increased.

Hence the problem is not with numbers itself. The problem is the way we analyze the case using the given numbers. A good consultant is one who asks relevant questions with the given numbers to come with analysis.


Bharathwaj Mohan

Management Consultant




In the life of any organization, there are many milestones which have historic value in the growth of the organization. One such milestone is the commencement of Process Mapping and it’s documentation. CEO’s take this decision for various reasons. Some amongst them are – it is fashionable, it is a prerequisite to getting ISO certification, competitors have done it, mistakes and errors are

Figure 1 - Picture from See the attention being paid to the Top by the boy!

Figure 1 – Picture from
See the attention being paid to the Top by the boy!

happening all over the place, key employees have left and people have no body to guide them and so on. Whatever be the reason, it sure is a celebration mile-stone, equivalent to individual’s birthday – to be celebrated each year – but with added responsibility for status review each quarter!

When a CEO triggers the Process Journey – he is expected to make two promises:

  1. To personally support the efforts till the documentation and initial implementation is completed.
  2. To personally review the progress of continued usage and improvement at least every quarter.

The first promise is obvious. The importance of the second promise is better understood if we imagine that initiating this project is like keeping a top (Indian Lattu Wooden Toy) spinning all the time. By nature, the Top continues to spin and remain vertical due to rotational momentum / gyroscopic effect. As soon as it stops, someone has to again provide the requisite energy. All processes are like spinning the top – they require a constant watch and external support (motivation?) to keep them going.

Top is a physical entity and it is easy to know when it needs support. How does one know when the Process Journey needs external support? Like a human system, when one is unhealthy, some uncomfortable symptoms develop. We have a choice to ignore them. But being responsible for our own bodies, we normally don’t ignore them. However, similar symptoms pertaining to process failure are likely to be ignored – by participants, process owners as well as other stake holders, unless management is vigilant. What are these symptoms? Some of these can be:

  1. Some employees stop measuring or recording the process outcomes. These are generally those disgruntled employees who feel that sharing data would make them less important. They have been approached almost by everyone in the past for each and every thing. They have been useful and had long innings with the company and follow orders only of very senior management only.
  2. Many fields in the data formats / forms remain unfilled or left blank with no-one asking “Why?” or even revising the format. I have seen it happening in many organizations. When asked about the reason, I was told that this data is very difficult to get. When I countered that why has the form not been revised, everyone was surprised. It never occurred to them that this was their own form and that process owner has the liberty to make changes in the form.
  3. Formats are filled and submitted. However, no one analyses the data or checks the satisfaction of the operations. Since analysis is not done, no feedback is given. Once this is observed by the employees, they get demotivated and slowly start taking casual approach to following the processes.
  4. Check lists are not taken seriously and are just signed for having been complied. As an example, a check list in an EPC company required that before a drawing is approved for construction, all points on a check list be confirmed. One check list point required that it has been assured that the outer end of the foundation is at least “x” distance away from the nearest foundation. Even though it was confirmed, frequent foundation interference was reported from site. In spite of frequent training and follow-ups, this error continued. Management then changed the process and now enforced that for each foundation drawing, the distance to the nearest foundation shall be written. This way, the designers were forced to look seriously and dig that data. This succeeded and the number of site issues reduced.
  5. Formats are filled with cooked data. Supervisor himself is not convinced of the utility of the form and therefore fill the formats based on their gut feeling rather than ground reality. This shows a behavior called “Compliant” rather than “Contributory”.

“Unused data is as good as “DEAD” – occupying costly space in files or data storage system.”

There are many more types of symptoms, but as we can see they are mostly linked to human behavior and motivation. No amount of coxing or requests or reprimands or consequences would work, if the culture has been allowed to deteriorate systematically by not keeping the second promise of the CEO i.e. “To personally review the progress of continued usage and improvement every quarter.” The top has stopped turning without the external stimulus – the never ending journey has ended! Watch out for symptoms and take timely actions. CEOs just can’t delegate every thing – some promises must be kept at all costs.

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V K Mehandru

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Challenge for Profit 1 – Measure & Record

Human beings get motivated by challenging goals. Yet this method of motivation is not much used in many organizations. Setting goals and achieving them requires measurements – Goals without measurements are like dreams and wishful thinking. Getting employees to set goals or even record data requires competency in interpersonal skills.

What to measure?

An organization is an entity transforming inputs into saleable output (tangible or services) using processes. Clients pay for the output delivered to them when it meets their requirements regarding quality, cost, performance, safety etc.


Measurements can therefore be done specifically for each of the three blocks above. If you have not yet developed a good measurement system, it is best to start at the Output Block, since it directly impacts the customers.

Be clear about objectives

Measurements help in recording data to establish base line. How much product or service is being produced in a unit of time – which can be a shift, day, a week, month, quarter or a year. Knowing the production rate, we can analyze performance trends, performance variations with season, within various teams, within shifts etc. Base line can also be used for bench-marking performance with competitors. It is usual to create ratios of output by dividing it with number of employees or with capital employed or with floor area employed (for example sales per square meter in a retail store) etc. Once these ratios are established, it is easy to set goals to improve them over a reasonable challenging time frame. Providing these challenges to employees provides them with adequate freedom to innovate, show their skills and use  their in-depth ground level knowledge.

Employees will usually come out with many suggestions about how improvements can be done.

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Management Role

Management’s role is to establish priorities for improvements. It is obvious that those improvements which are less costly and would produce immediate benefits be taken up immediately. Necessary change management and execution techniques should be used and teams formed with management constantly providing support and review. Keep in mind that improvement requires time of employees and if they are already overworked, it would not be possible for them to deliver the expected goals. It is management’s role to provide resources and support – this requires a definitive mind set of the higher management who should decide whether or not they value a culture of innovation, growth, challenged and engaged manpower or wish to continue business-as-usual.

It is vital that once management decision to go for measurements is taken, the projects which are easy and quick are attempted in those pockets of the organization where positivity and team-work is better than average. Once results are shown and communicated to all in the organization, it sets the pace for fence-sitters to join the organizational efforts to make the organization a place worth working in.

VKM Profile Picture

V K Mehandru