How One Company Grew Revenue by $16 Million in 6 Months

— December 14, 2018

While I’ve learned many lessons throughout my career, this one is something I always come back to — be wary of the mindset that numbers trump everything else. And that’s why this quote is a favorite of mine: “Not everything that can be counted counts, and not everything that counts can be counted.”

Often attributed to Albert Einstein, this 1963 wisdom is courtesy of Bruce Cameron. Cameron’s thought helps highlight the need to be careful of what we measure, and what we don’t. When we are caught up in the “meet all metrics no matter the cost” game, we lose sight of the purpose behind the numbers and open the door to significant lost opportunities. Even making small changes to the flawed mindset of achieving numbers at any cost can equal big dollars.

Watch What You Count

Here’s what I mean. I’m thinking of a large restaurant chain. We all know that key metrics like year-over-year sales and customer satisfaction are the Holy Grail in this business. However, one of that top internal metrics for anyone operating a restaurant is also “labor management”.

Each restaurant fits into a “labor model” that allows a certain amount of staffing per shift, per day, and per week. This model follows a profit profile for the restaurant, which must be adhered to quite strictly. The typical practice for a restaurant manager is to bring people in to staff the restaurant if hours are under the allocation, and limit the shift staffing when hours are over.

In fact, most restaurant chains “rack and stack” rank each location based on how it performs each period against the allowed labor cost. Any restaurant locations that don’t meet the acceptable level of labor expenses have to pay serious penance and get back in line.

So you can see how the labor number is king. It is both revered and feared. Cameron might phrase this as “not everything we count, counts”. And, after all, managing to a number is very different than managing to a successful outcome.

In the case of this restaurant chain, it began to realize that staffing to the business was more important than staffing to a predetermined number. The insight was that the greatest managerial action was to staff to a sales forecast rather than to a budget allocation.

Managers began to build and refine their forecasting abilities and match staffing levels to their forecasts. They even upped their game in areas that would positively impact their forecasts – not only expertly managing the cost side, but also increasing revenue through new programs, incentives, and promotions.

By making this one small change – shifting to managing labor based on a forecast rather than on a budget allocation – the restaurant chain generated $ 16 million of additional profit in just the first six months! Through this shift in strategy, the company helped their managers to strengthen their people and business skills by helping them learn when to add staff for peak demand periods and when to reduce staffing based on the business volume.

Why Counting What Matters Works

Managers were empowered to make staffing decisions that were right for their locations and they were thrilled with the results. The employees were happy to be appropriately busy on their shifts – rather than completely overwhelmed or totally bored, which was the case when restaurants were under- or over-staffed. And, of course, the corporate office could not have been more enthusiastic about the positive change.

What little change can you make that will result in big dollars? Ask yourself these questions:

  1. Do we have metrics that we mindlessly follow, which may seem right on the surface but are encouraging the wrong behavior? (Like managing labor to an allocation instead of a forecast?)
  2. What is the true skill set that we care about and if we improved in little ways, could we reap big benefits? (Such as forecasting for example.)
  3. What is it that counts, that we are not really counting? (Can managers be more empowered to forecast based on busy/slow periods?)

Originally published here.

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Author: Jim Haudan

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