I recently watched the movie Moneyball starring Brad Pitt and Jonah Hill. The movie is based on the novel that was written about the 2002 Oakland A’s. They had just lost in the 2001 postseason to the Yankees, and at the end of the season they lost their three top players. The A’s General Manager, Billy Beane (Brad Pitt), wanted the recruiters to change their ‘old school’, outdated way of recruiting and also tried to convince the team owner to spend more money on the players, which he would not do.
Beane soon met Peter (Jonah Hill), a recent Yale grad with a degree in economics and a flare for picking solid players based on their performance statistics. This process, called sabermetrics, was used to recruit a team of players based solely on stats. This ‘out-of-the-box’ method was new to baseball and challenged the recruiters’ outdated way of thinking.
Beane pushed on and fielded almost an entire team based on player statistics. This caused problems in the management of the team, but he pushed on and made Peter his assistant general manager. In the beginning, they lost many of their games and the strategy was not working for various reasons. Beane and Peter then became personally involved with the players – talking to them, learning about them, and encouraging them. By the time they got to the mid-season break, they had blended their sabermetrics technique with keeping a personal handle on what was going on with the players. This blend of strategies worked very well and they won 20 games in a row, an MLB record. They went on to post season and ended up losing before they made it to the big game.
I think there are three important principles every business can learn from this movie:
#1. Beane stepped out and brought ‘out-of- the-box thinking’ to a group that was set in their ways and not about to change. This brought many uncomfortable situations, including infighting, doubt and a lot of bad press from the media. It was very difficult for Beane to stay the course and at times he had to outwit the coach to get his goal accomplished. This was something that he and Peter believed in and they were willing to stake their careers and reputation on it. There are times in our businesses when we need to chart a course that is different than anything we have ever done and then stay the course. Recruit the most knowledgeable people you can find who have experience in what you want to achieve and can help you get there. Chart the course, look for the situations that could go wrong, mitigate those situations, and GO!!
#2. Beane and Peter relied heavily on metrics, statistics and numbers. (You never would have guessed I would go here!) That’s right, you need to know all of your numbers, how they work, and how they are interrelated. Many business owners and management teams I work with get caught up working in the business and not working on the business. Here are just a few of the things you should know:
- How to read and understand your balance sheet, income statement and statement of cash flows
- What creates sales in your business and track that from the earliest point possible in the sales cycle
- How profitable each of your products or services are
- How profitable each of your customers are (know who buys what, when and how much of it)
- Know your industry and what they are experiencing
- Know your customers and what their concerns are. If you know your customers concerns you can design your offers into that
#3. Beane and Peter combined their understanding of statistics with personal involvement with the players. From a management standpoint, this means understanding your financial performance as well as “walking the four corners” of the office or shop floor. Know the numbers and the people that make up the team. Care about the numbers and the people. One thing I hear consistently from the employees of our clients is that they don’t get enough direction from management and management doesn’t know what the employees are doing. There is a complete disconnect in many cases between management and the rank and file. Beane and Peter were able to understand both – and we should too.
Here is my challenge to you: over the next month, take two hours each Friday morning and do the following:
Week one – take two hours, lock yourself in your office and pour over your numbers. This process could mean many things, but I suggest:
- Review your most recent balance sheet, income statement and cash flows.
- Review your accounts receivable aging
- Review your accounts payable aging
- Review your backlog or your pending sales that need to be shipped
- Review your sales pipeline reports
- Start to ask a lot of questions – that is how you gain a better understanding. If you aren’t asking questions you aren’t learning!
Week two – two hours by yourself again with the following in mind:
- How profitable are our products or services – by product or service
- What are our sales by customer?
- What did each customer buy?
- How long does it take the customers to pay? Which customers pay faster and why? Which customers pay slower and why?
- How do you increase your sales of the right products to the right customers?
Week three – (you guessed it) two hours again
- What have I learned in the last two weeks?
- Am I satisfied with what I have learned?
- Do I need to ask more questions? What questions and of whom?
- Who do I know that can help me with this process – either on my team or not on my team.
Week four – the final two hours (or the beginning of a path leading to a more successful business)
- What do I want the future of this business to look like?
- How often will I get up to date financial information, what will I get and from whom?
- How often will I get sales information, what will I get and from whom on the team?
- What am I satisfied with in the business?
- What am I dissatisfied with in the business?
- What path do I want us to be on? Where are we going and how are we getting there?
- What are our roadblocks?
If you can take eight hours over the next month, broken up the way I outlined above, I assure you the time will be very well spent.
Tax returns, financial statements, IRS communications and similar items are vital to address and process, but they should not be the focal point. Think of these as tasks to get to the real work, which is providing you the information you need and an interchange of ideas to move you forward. The goal is to help you implement your strategies and vision. This is what we do!