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CHICAGO — As I listen to our industry’s experts, I become more amazed every day by the continued absence of management-support and fiscal-accountability systems that tell you not what you want to hear but where you are headed.
It’s pretty easy to manipulate all types of systems by either having too much definition or not enough, i.e. those suffering from the I’m-not-sure-I-really-want-to-know-the-truth syndrome.
Systems will become more broken as the financial crisis continues to take hold of our economy. It’s a shortage of good systems, not resources, that leads to imprecise outcomes. They fail to provide the actual pounds or pieces produced and real processing cost; detailed information on energy usage; labor cost, including fringe benefits; and precise sales data. In short, they lack the reliable data that can supply you a profit-and-loss scenario.
These systems have always been flawed but current economic stresses are making things worse. Our recession cycle is not normal, and if systems are not designed to capture and analyze all data, the next four years will lead to more major bankruptcy claims than we can ever imagine.
There are simply no signs that our industry's dim revenue picture will brighten drastically in the years to come. The time for those oft-used budget tricks has passed. Reserves are being drained from just about every facet—operators, suppliers, professional groups, trade shows, etc.—and we are simply operating outside the bounds of historical experience.
This is why systems must be designed to realistically depict the fiscal facts; if you are going to survive, you will need systems available to tell you everything you need to know to keep your financial head above water.
With a revenue plunge on the way, corporate managers must awaken to the reality that our economic conditions are dramatically draining resources; I predict that top-heavy organizations will fall first.
It may be too late for many organizations to jigger their financial status, thus creating corporate grief that floats somewhere between denial and bargaining. Every organization, if it is going to survive the next five years, must rethink its spending. The analogy that you have to spend money to make money no longer applies during these economic times.
Systems that are able to fully depict the cost of doing business, including everything from labor and manufacturing to marketing and travel, must be developed immediately.
When resources are scarce—and they truly are for most—the way to make an impact is not just to cut but to direct said cuts in such a way that there is some kind of prioritization. As a result of these decisions, hopefully we can keep morale up and maintain our legacy. We all must play a vital role in our organizations to manage the economic meltdown surrounding us.
If you are confident that the fiscal-management systems supporting you are not dysfunctional, you are mistaken. No system is truly factual at all levels, and no systems are available that will tell you what you need to know—everything.
It has been management’s desire to stay status quo, maybe improve a little here and a little there, but are you able to gather the information you need on a day-to-day basis? Or has anyone asked you what you need? Think about it.
Times are becoming more and more financially critical. Smart systems design and management will be needed to survive.
Have a question or comment? E-mail our editor Matt Poe at [email protected].