You have to know the numbers.
It’s always the people who say “now, wait just a minute.”
You probably know them… they are the numbers people. They take the arm waving, visionary ideas…hit the pause button…and ask the quantitative question.
It might be financial: How can we justify those kinds of margins?
It might be operational: How can you assume we can produce that many widgets with only our bare hands?
It might be organizational: What number of sales people are required to meet those projections?
But the question is placed. And, if it’s not, you want it to be. The numbers are important for a reason…they form the most testable type of hypothesis.
A season of advice…
This is the time of year where I inevitably get the chance to talk to younger people starting out their careers. They might be finishing up college and looking for a job, or just referred my way for ideas and guidance. If that gives you a shiver, then let me put you at ease: My advice is simple.
Use your early career to learn the numbers. Learn how the basic financial statements work, and how things like margins and asset turns determine the performance of a firm. Learn to model them. Get smart on the quantitative drivers of markets. Understand how to represent a product’s quality and positioning in terms of market share and margin. Know the numbers.
I give this advice for one reason: The strongest executives I know, whether they are sales oriented, ops oriented, or otherwise, understand finance and quantitative drivers of business. They understand that the numbers show progress. And, unfortunately, it can be tough to get training on the numbers later in one’s career. A lot of executive fake it, of course, but people who know can see it.
Learn the numbers early so that you can go through the rest of your career without the fear of being found out.
But, if you take my advice…
Knowing the numbers will saddle you with one annoying habit. It’s the “wait just a minute” habit that I started this post with.
You will, in some circumstances, become the “annoying” presence who always attempts to ground the conversation in quantitative reasoning.
The New York Times recently published an article about how much more creative the accounting in public companies has become. As companies insist on more and more non-GAAP representations of their operations, the need for people to know the difference heightens.
But, when you know the difference, it can make for some uncomfortable discussions with your less quantitatively grounded brethren. One of my favorite examples, albeit a sad one in historical context, is when Enron CEO Jeff Skilling famously called an analyst an “asshole” for questioning accounting standards. The annoying “asshole” was, in retrospect, exactly right.
More than sales, more than marketing, more than anything else, know the numbers.
Okay, then know sales. Sales is important next.
As always, I’d love your thoughts on this one.