July 8, 2010

A business lesson… AT A CRICKET MATCH?

So I am on vacation last week in the beautiful Caribbean island of Barbados. It has been something of a tradition for the men in my family to attend a 5-day cricket Test match in that country for the last several years. I’ll spare you the grisly details of the match, but it is relevant […]

Cricket match played in front of empty stands

So I am on vacation last week in the beautiful Caribbean island of Barbados. It has been something of a tradition for the men in my family to attend a 5-day cricket Test match in that country for the last several years.

I’ll spare you the grisly details of the match, but it is relevant to note that our home team, the West Indies, has been doing so horribly in the last several years that Kensington Oval, the best cricket ground in the entire West Indies, has been noticeably losing more and more spectators each year. A beautiful facility that holds more than 25,000 at capacity boasted a spectator count of about 200- I SAID 200 – on the first day of the match.

As we went through security, even though I was on vacation, the consultant in me could not help but notice that there was approximately the same number of people working the turnstiles as there had been in recent years.

This trend was noticeably evident as we walked past all the ushers waiting to direct us to our seats (truth be told, we could sit 1 to an entire row and it would not have mattered). It soon occurred to me that the number of workers- ushers, ticket-takers, security personnel, etc- actually OUTNUMBERED THE SPECTATORS in the stadium.

Then I asked myself- given the trend of dwindling attendance in the West Indies for the last decade or so, how could it possibly be that the number of workers appeared to be the same as in recent years?

How does this troubling scenario apply to your business? It all comes down to how you treat your expenses. In other words, make a true distinction between what is truly an overhead expense , by definition, fixed- at least in the short term (the salaries of the players, or the monthly payments on the facility, for example), and what is a direct expense , subject to being reduced, dependent on the extent to which there are sufficient revenues to cover that direct expense.

Take a hard look at your business, and take special note of what your expenses are. Is there an area that you can reduce expenses? Can you identify any direct expenses (variable, and should move in proportion to revenues) that you have been treating as overhead (fixed)?

Are you using too much payroll, but are reluctant to reduce it out of “force of habit”? Have you had revenues fall, but continue to order/use the same supplies? The possible scenarios are innumerable, and might be vastly different for you, given your type of business, but I hope that you understand the lesson.

It is also worth mentioning at this point that the managing body for cricket in the Caribbean- the West Indies Cricket Board (WICB)- is notorious- comically so- for its shocking ineptitude. It is therefore not surprising that a basic tenet of business management that I have described here was missed by them.

My rhetorical question for you is simply this: is your management style similar to that of the WICB, or do you know your business well enough to make positive cost-cutting changes in response to a changing environment?

The opposition’s bowler is at the top of his runup, breathing fire, and the bat is in your hands…

A few thoughts: