Have you heard the phrase “penny wise and pound foolish?” This statement refers to being careful and economical in small matters while being wasteful or extravagant in large ones.
We just got an email from an executive who decided to cut two thirds of the effort and correlating benefits out of a proposal. His decision was motivated by money and the desire to do things as inexpensively as possible. Unfortunately, he’s going to miss out on exponentially better outcomes that he would have achieved with the complete proposal. That made us think about the common money mistakes we’ve seen over the years.
- Pay More Later – You can pay now or pay later. The cost to accomplish something doesn’t change just because you don’t want to pay for it. We repeatedly see where executives try to skimp on project investments because they don’t want to spend the money. What they don’t realize is that the longer-term cost will far exceed the present-day cost. A great example is significant software implementations. Whether it’s SAP, Workday or updating to Office 365 there is a whole lot more to the project than just installing software on someone’s machine. There is the cost of education to ensure people know what to do. There is also the cost of helping people accelerate through the change curve to regain productivity as soon as possible.
- Wheeling and Dealing – Trying to search for the best deal instead of getting the best results is foolish. As our mentor often said, would you really want a discount on your open-heart surgery? Purchasing your office supplies at the lowest price may seem like a good idea, but when pens are not working and pads of paper are so thin that the ink bleeds through so you must skip sheets of paper – the savings aren’t such a good deal. Think about how skimpy grocery store bags became, requiring that they put your items in double bags. The company thought they were saving money by purchasing cheaper quality – but when twice as many bags are used, does that really work out?
- Lost Learning– Failing to invest in yourself means that you are failing to take advantage of the greatest investment opportunity that exists. That’s because investment in your own learning pays astronomically high dividends and compounds over time. There is a commonly stated estimate that spending money on your personal development gets a minimum 30% return. Consider the advanced opportunities, the increased success, and the new skills you get from development. Whether it’s coaching, a course, or a cohort program there are lots of ways you can grow and activate your potential.
- Underdevelopment – Failing to invest in your people has all the same arguments that not investing in your own learning has. So many companies say that people are their most important asset, yet as soon as times are tough, the training and development is the first thing to get eliminated. We want to be very clear that development doesn’t have to equal company sponsored training programs. There are lots of ways to be developed. From joining a professional association, to reading a book or watching a TED Talk, you can grow and develop. What’s important is to ensure that your people take personal responsibility for their development and you are doing everything possible to support it. What you do to invest in your people pays off far greater than any capital investment you can make.
- Saving or Cutting – you can’t save your way to prosperity or cut your way to growth. In other words, people believe that cutting costs will help their bottom line. While that is true in the short term, there are many costs that are not accounted for such as the engagement exhaustion or productivity penalty. Most organizations that cut back and cut back and cut back end up with a shell of an organization that can never realize it’s productive potential. Remember Chainsaw Al from the 80’s? When he was at Scott Paper he eliminated 11,000 jobs which simultaneously brought a rise in share value of 225%. It was a short term improvement that cost the dignity, purpose, and sense of the organization and replaced those ideals with fear and intimidation. (see Working for the Boss From Hell)
By calling out these foolish money choices, we hope to help you think twice about common leadership decisions that end up costing more in the long term.