What We’re Leaving on the Table…

Missing expectations can be a significant profitability killer! Don’t take my word for it though, ask anyone who’s ever worked for a publicly traded organization… On May 25, 2023, an interview on Yahoo Finance detailed a 14% drop in the value of Dollar Tree stock after the company missed its profit expectation in the previous quarter. When The Home Depot reported earnings of two cents less per share than expected for Q4 of 2022, being the first time the company missed Wall Street’s expectations since November ‘19, its stock closed down 7% according to a CNBC article at that time… 

I have very clear memories (or nightmares) from working in that world for close to two decades.Being in an aftermarket production facility that was far less restricted than our sister facilities that produced solely original equipment parts that went straight to the Ford’s, GM’s, and Toyota’s, our spending (on ANYTHING) was scrutinized heavily all the time since local margins would often be the difference maker in where we stacked up against those Wall Street expectations. All too frequently, we saw capital spending budgets capped just a few weeks into a new quarter - and we nearly always brushed it off to being the most important quarter in the history of the world… If you missed my sarcasm with that, read it once more! That same message every quarter, year after year after year, fell right in line with Dash Parr (from The Incredibles movie) saying that “when everyone’s special, no one is…”

Don’t get me wrong, I do understand how critical an organization’s quarterly performance is to their overall profitability, especially when it comes to whether or not investors are willing to back those organizations. That said, I’ve definitely seen playing these quarterly games have a penny-wise/pound-foolish effect more than a few times! As leaders though, I’m convinced that this is where we can play a key role in capturing profitability that’s quite often missed altogether.

As we looked at the cost of poor communication previously, I shared a stat from an SIS International Research study showing “that a business with 100 employees spends an average downtime of 17 hours a week clarifying communications.” Let’s be honest here, this is nowhere near the total amount of time used for communicating what needs to be done; this is just the time wasted circling back to share the message again (and again) when it wasn’t received the first time! If we’re going to have any hope of addressing the confusion that kills so much profitability, we absolutely must become experts in being abundantly clear in sharing expectations with our teams.

Regardless of whether we’re leading one of those publicly traded companies with such close ties to Wall Street, we’re part of a small closely-held business that’s been run by one family for generations, or anywhere in between, what we do on a daily basis to ensure our team members have complete clarity around not just WHAT is expected of them, but also WHY every detail matters, can have much more immediate impact on the bottom line than keeping a tight hold on the purse strings this money only to push a necessary expense into a different budget cycle. This eliminates many of the corporate games that make for bad headlines but it also eliminates something else that has a more direct impact on the profitability we’re leaving on the table - so that’s where we’ll pick up next time…