What Numbers Can Never Tell You

Posted by Paula Paine on May 20, 2011 in Faculty/Staff, "Other News", "School of Business", "The College", "Upcoming Events" President Kevin C. Eichner writes a bi-weekly column for the Ottawa Herald entitled “Leadership Matters.” For our readers who don’t have access to the column, we would like to provide you with this recent example. Check out the Leadership Matters website at www.ottawaspirit.com/leadershipmatters to read additional articles in the series. It is a fact of our modern business life that we need strong and accurate financial reporting in our enterprises. This is so for operating purposes, for making important decisions, and for accountability to third parties such as boards, regulators, and lenders, for example. There is absolutely no question that a good, sound financial reporting system is critical to any business or non-profit today. But it is also true that leaders can sometimes become mesmerized by their numbers which, in turn, can cause them to miss some things that numbers can never reveal to them. The problem with financial reports is that, by definition, they are historical in nature. They don’t tell you why something happened, only that it did. They can’t tell you what is likely to happen, only that based on trends it might. This is the fundamental issue with accounting and finance and why an over-reliance on the quantitative side of your enterprise can get you in trouble. Numbers, for example, cannot tell you whether morale in your unit is up or down. Conversations and observations are far more likely to reveal the status of morale in your organization. Numbers cannot tell you whether to hire or promote person X vs person Y. Performance data and statistics are useful and add to the objectivity which is so often lacking in these decision areas, but they are a poor substitute for judgment and a sense of the person and his or her aspirations. They may add data to what the person has done, but not much about what they might actually be capable of. Numbers probably will not tell you when a disruptive technology or whole new product is about to destroy your business model. The numbers at Blockbuster were pretty exciting just before Netflix was launched. Numbers will not tell you how to deal with an ethical dilemma. Only your faith, conscience, values, and guiding principles will be useful in those gray situations that so often arise. Numbers really can’t tell you whether you are doing a great job, a satisfactory job, or a relatively poor job as a leader. They may be an ultimate derivative of your leadership, but there is far more to the leadership equation than simply producing great gains in revenues and profits. To be sure, a leader who is good at hiring, directing, nurturing, and growing talent and who doesn’t get strong financial results is still not a good leader. But one whose unit is generating strong financials and who isn’t any good at these other leadership activities probably won’t generate those positive financials for long, either. At Ottawa University, we are working very hard to ground our business school students in the important principles and practices associated with strong financial management, as this is essential to their future success. But we are moving far beyond these basics to make sure our graduates blend an appreciation for the so-called “soft” elements of leadership with their analytical and technical skills. If we have learned anything from what we have seen in America in the past few years, it must be that numbers can’t tell us everything we need to know.