The Ripple Effects of Misinformed Decisions in Business

Hi there. Welcome to Better Business Insights. I'm Liz Jarvis.
Today we’re going to talk about the ripples decisions can make into your business. Now there are good decisions and there are not so good decisions. So today let's talk about the not so good decisions.
I'll give you a couple of examples of things that were unexpectedly damaging to business. One is in relation to a dairy farm I worked with once, where the owner was able to observe the staff around the place. You know, it's a big farm, there's lots of things to be done. And at one stage he observed the drovers. They're the guys who ride around on the bikes and get the cows up to get milked.
He observed that on a few different occasions they seem to be, you know, that person or that whoever was rostered at that time, seemed to not be doing anything, so surely that means that there's a cost that could be cut. So after much discussion, it was agreed that the hours for the drover would get reduced.
Now, it was sunny and fine and everything seemed to be going well. But then the weather changed, and with the weather change comes a whole lot of other things. Those unexpected ripples of things that go on. And without the extra time that had appeared to be wasted, those drovers weren't able to get the cows up correctly or to get them all in.
I'm not sure of the exact details that happened, but in dairy farming that actually has long consequences, complex consequences because the cows have a certain amount of milk to give, but if they [00:02:00] get unwell, if they don't get milked on time, if they get upset, all those things, that amount of milk drops off.
If they get sick, that milk gets infected. That affects the statistics of the milk, and that can affect the price that the farmer is paid for the milk. So, it's a perfect example of where a cost-cutting measure can actually backfire. Another example that I've heard of recently, was in a retail environment where there was a lot of actual interaction between the sales people and the clients.
There was a lot of upselling that happened, but the accountant at tax time looked at the statistics and looked at benchmarks. And said “Look, your wages are too high. You need to cut your wages.” So a number of the workers within that retail business were asked to cut their hours and there was less overlap on the floor. And there was a bit of animosity then with the employees. But at the end of the day, what happened was that sales went down. Because there wasn't enough time for the person on the floor to manage, to upsell, to really serve the customer so that they could get what they needed.
Perhaps some customers didn't come back. Perhaps some customers didn't like that they were rushed in their purchases. Either way, that person later on, put the staff back on. But it's very hard to claw back those sales. Once you've missed them, they're gone forever.
So, I hope these couple of examples of the ripples that can happen when you make decisions, without considering all the consequences, will help you in your decision-making in your business.
Join me next time.

It's important to think through decisions about saving money in your business - I n this episode I share some insights into unintended consequences of cost-cutting - Those savings cost the businesses in question so much more than the money being spent in the first place. It always helps to talk through the consequences of your plans with an experienced professional - but don't be afraid to stand your ground as you unpack ideas. Reach for a free strategy session and I can look over it with you.

Take Control of Your Business Profitability

Book a judgement-free strategy session that will provide you with clarity.
No change in accountant or bookkeeper is required.
Book a free strategy session