Financial metrics: Guys sound like a-holes when discussing, yes?

Financial Metrics

My mom used to say something about my uncle (her brother) along the lines of “He emerged from the womb with an understanding of financial metrics.” I think that line is also in Royal Tenenbaums, although it might be a little bit different.

I will say this: very few men (or women) emerge from the womb understanding much about the financial structure of companies or themselves. You need to learn that stuff, although many admittedly do not. Per research, for example, most people don’t understand what their salary represents or what factors contribute to their earning potential. (This means that companies have most of the power in salary negotiations, as an aside.)

As I’ve ambled through life, one thing I’ve always noticed is how guys (especially) discuss financial metrics once they understand the terms. Let me give you a quick example. A few years ago, I was leaving work at around 5:15pm. (Let’s be honest — it was 3:41pm.) A high-ranking dude is on the phone in his office with the door open. I hear him yelling, “It’s a $27 million relationship value play, Jim!” I burst out laughing. I always wonder if he heard me laugh. Anyway.

That’s the kind of stuff I’m talking about. “Relationship value play” isn’t really even in the bucket of “financial metrics,” because I don’t think anyone has ever put “relationship value play” on a balance sheet. But …

Have you ever sat in a meeting and discussed financial metrics?

We all know meetings are awful, but meetings about financial metrics are usually even more awful. It’s just a bunch of chest-puffed guys playing acronym volleyball in there.

“CAGR!”

“EBIT!”

“ROA!”

“ROE!”

“ROCE!”

“EPS!”

If you know what all those things mean, Godspeed. I had to Google a few of them to write that.

Why does this irritate you so much, Ted? 

I’ve wondered this for a while. From a personal standpoint, I think it’s maybe that I grew up on the Upper East Side of Manhattan. That’s a community largely driven by financial metrics, but I never came to really embrace or understand them. (I did get a A-Minus in AP Econ, though.) So maybe when I hear guys toss out financial metrics in a bellowing way, it reminds me of childhood potential gone awry. How deep was that, eh?

But more broadly, I just think it speaks to the problem with most workplaces. Work is made up of human beings, so it should be about human beings — but it’s not. It’s about numbers. And, ironically, the one department at most places with “human” in the title is automated to the hilt. So that’s fun! I was on the treadmill a few days ago. Some guy next to me is on the phone (Bluetooth) and snarling at the other end, “I don’t give a fuck. Get your numbers up.” That’s how most guys look at work, unfortunately. And when that attitude carries them to success, we deify their “workaholic” nature.

All this stuff makes me want to break out in a rash. The purpose of a for-profit company is to make money, yes. But until we’re at full automation, the conduits (or players) in the making of that money are human beings. But instead of realizing that and managing to their strengths, we essentially treat most employees like pigs who happen to have mastered the art of driving a Saab. An all-consuming focus on financial metrics is at the root of much of this, IMHO.

Here’s a fun little game

Make up a bunch of acronyms that could be financial metrics. Start many with “R” for return, as that’s how many do start. Then go into any random meeting. Wait for someone to ask an open-ended question, then wait for a 2-3 second pause. Immediately say something like:

“Well, I’m afraid if we do that, we’ll be over our skis on RDF.”

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If there are 10 people in this meeting, 2 will look at you funny. The other 7 (besides you) will nod approvingly and smile, even though what you just said makes absolutely no sense whatsoever. Welcome to first-world business. You just conquered the financial metrics game. There’s honestly a good chance you might be promoted in six months because of that one moment in that meeting. People get advanced for less.

Can we change this focus on financial metrics?

Absolutely not. We’d have to shift most of the economy away from its current structure and focus. Not going to happen. We can, however, think about business competition differently. The digital channels that have opened up mean it should be way more about collaboration and “platforms” than “trying to beat the crap out of your rivals and steal their market share.” Unfortunately, a lot of guys still think the latter way. Financial metrics are king, and beating your rivals is the cherry on top. Until we move away from that myopia, we’ll be running in circles on concepts like “empathy for employees” for a bit.

What else you got on the financial metrics culture?

Ted Bauer