Decision Making: A Case Study

Better QuestionsI had a client meeting last week where the business told me she is worried about all the money she is spending.  She believes it is a little out of control but doesn’t know what to do.  After all, you have to spend money to make money.

The need to spend money seems to be a human trait.  How many times a day does someone come to you with “I need to buy ….”  Staff, spouse, kids?  And as soon as we ask the question: “Why do you need that?” our goose is cooked.  That’s because it is very easy to justify spending money on something we care about.

Back to my client.  Business is good for her.  She is growing, cash flow is reasonable and she is poised to step up to the next level.  And her staff feels the same way.  Here are some of the requests made of her:

  • They need to buy uniforms for all the staff. Head to foot including shoes.  This will present a better picture to the client.
  • They need to do a major upgrade to their website. The one they currently have isn’t very good (an opinion).
  • They need everyone to take a D.I.S.C. Assessment so staff can be better measured and the company will be more productive.

The list goes on but you get the point.  And all the requests are somewhat valid which makes a challenge to the request all that more difficult.  So how do we deal with the rampant requests to spend money?

The answer we came up with was we changed the way anyone can present a request to spend money.  From this point forward, every request for money is challenged with:

If we spend this money, how will my company’s profits (or sales) improve over the next 6 months (or year or 3 years)?

If we don’t spend this money, what will not get done?  How will not spending this money lead to major or even minor failure in my company?

This sure changes the dynamic.  First of all, it adds a level of objectivity to the decision that was missing before.  Secondly, it challenges the requestor to make sure his goals are in line with the company’s goals.

It is so easy to spend someone else’s money.  I find no fault in staff making requests like those in the example above.  They are unselfish and have the goal of making the company better.  But the thinking is flawed because each of these items is a goal in itself and not necessarily a goal to make the company more profitable.  Speaking from the perspective of a financial manager, profits are very important to a compny.  This is what will allow our company to not only survive but also grow.

I hope this makes sense to you.  Email me if you have any questions or challenges to what I am saying.

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