MOST OF THE ERRORS IN OUR BUSINESS ARE EMOTIONAL

Every so often in our lives something happens to us that makes us pose, do a double take, reevaluate everything we know. Strangely it may affect only you out of the many people around you, who have had the same experience. It may be that they have experienced it before, got the lesson and are applying it in their lives or they don’t get it at this time. Their time will come.

That you get it now, or previously, not yet or never does not make you superior or lesser than the next man.

I had one of those moments, last week.

A twitter handle I follow, @BusinessMind posted last week “Most of the errors in our business are errors of emotion”....

It doesn’t seem like much but think about the profoundness of that statement.

A business is supposed to solve a particular problem in society and in the process make the business’ owner some money. If it doesn’t do that, then society will reject it or if it doesn’t do it in a cost-effective way will soon shut down.

The promoter of the business among other things, needs to sensitive to the society’s changing tastes and ensure his good or service remain in step with these changes or be slightly ahead of them. The way to do that is to be in constant touch with the market. Easier said than done.

Assuming the business’ management have taken this to heart, the next thing is to ensure this understanding is not only known but appreciated at a deeper level up and down the organisation.

Whenever a businessman complains that the economy is not doing well, it is at the tip of my tongue to ask whether his customer service is a up to scratch. You will be amazed how much business is turned away by lapses in customer service.

The saddest thing – for businesses, is that the majority of customers who don’t like your service and do not complain, outweigh those who complain. We are in a liberal economy; chances are they can take their business elsewhere.

Taking customer service as one business process the negative emotion of the frontline employee can cost you millions, billions or your whole business.

But at a strategic level, many businesses sink or swim depending on their asset allocation...

Ideally asset allocation should be slanted towards those assets that bring in more revenue to the business rather than costs.

Asset allocation is one place where emotions should be stored away and decisions be made with cold blooded precision.

So, take for instance the bank which breaks the mold of the high street bank and offers attractive propositions to depositors and borrowers. Soon the funds are flowing in, at a rate that they probably don’t know what to do – a good problem to have.

Staying with the normal bank business of collecting deposits and lending seems boring in the light of this avalanche of money. The managers start thinking they have hacked this money-making business and they can do no wrong, so they start speculating with the money – going into other businesses, bankrolling startups and dabbling in the stock exchange, they even build themselves a swanky new headquarters with all the whistles and bells. But soon the mismatch between their short-term deposits and their long-term assets catches up with them.

Another bank in the same industry, much bigger than the first, sells its headquarters to finance a roll out of computer system around all its branches, while renting its new headquarters. With the new computer system installed the bank can first, have access to all the resources mobilized around its countrywide network and attract customers, because now they have access to their funds from wherever they are in the country.

Twenty years down the road the first bank is history, remembered by older members of society during beer soaked reminisces, while the second is making money hand over fist, but still renting its corporate headquarters.

"The first bankers were making emotional decisions like we make as individuals. We want to buy land, build buildings and stock ranches, so we can point them out to our friends as our own and let them marvel at how progressive we are. The failed bank did that chest thumping on an industrial scale....

The second bankers – heartless bastards, let the numbers tell the the story. And numbers if looked at with cold logic, don’t lie. They cut back their costs, shoveled the savings into making their branch network more efficient and the rest is history.

This story does not apply to banking only. We saw it in telecommunications, media and nightclubs.

So, if you are to bet on one businessman or another shun the flashy businessman with the big, latest, four-wheel drive guzzler, with a company mansion atop the hill and expense account at the five star hotel, for the business still housed in a warehouse, holds its AGMs in the car park and whose CEO drives -- a four wheel drive nevertheless, but a ten year old version.