Monday, February 16, 2015

Words of Importance - Scenario

"We are planning to increase our production in anticipation of higher demand for our products."

"If people do not actually buy more, we may lose a lot of money. Our product is perishable and if we cannot sell it, we will have to junk it."

Those pearls of wisdom uttered in the second half were, obviously, mine. Needless to say, half the people did not even deign to listen and the other half sneered at what appeared to be a school-boy trying desperately to act like a manager. Very difficult to digest, since I was in my mid-thirties and could not exactly fit into my school uniform.

The thing is, I had no-one else to blame for it but myself. My parents and teachers too, maybe, since it was they who taught me that what was said was more important than the way it is said. But, then, if an education in IIM had not rubbed THAT piece of nonsense out of my head, how could I claim to have learned anything in IIM? So, it was only myself I could blame, after all.

You do not get the point? Well, let us rephrase that answer the management way and you will.

"If you consider the scenario where the sales rise only by 0%, the net profits will dip by 100% since our product is perishable and we cannot recover the variable costs."

There...you see! The moment managers hear the word 'scenario', they realize that what I am saying is a result of scientific analysis and not just hot air. (YOU consider the word 'scenario' IS hot air? Who asked you, anyway, we are talking of managers here) I have a sneaking suspicion that things like this happen at managers' houses.

Wife: It may rain today. Take an umbrella.
Husband: I don't think so. It has been cloudy the last two days but has not rained a drop.

Wife: Consider the scenario that it rains today. There is a 85% probability that you will get drenched and a 60% probability of your getting a cold.
Husband: Where is the umbrella? I can't take a chance.

Come to think of it, there is probably a great deal of marital discord in manager's houses merely because their spouses do not know the importance of the word 'scenario'. I mean 'Consider the scenario that your children may grow up rebellious. You need to go to that PTA meeting today."; 'Consider the scenario that I may blow up our retirement funds in shopping. You really need to come shopping with me." etc.etc. could well get results. But...I digress.

To get back to what I was saying, I truly deserved to be considered a school-kid playing at work, since I never really knew the right words to use. If only I had learned the seminal importance of the word 'scenario', for one, I might have been a wise and respected manager,scorching up the corporate ladder in unseemly haste.

It pays, of course, to elaborate on 'scenario'. I mean, it is hardly a help to just say, "In the scenario of low growth in sales, we will make losses" though it certainly is far better than saying "If sales do not grow, we make losses." You should never forget the fact that numbers, no matter which hat you picked them from, give a semblance of not only accuracy but also great diligence. So, learn to extend the 'scenario' thing by saying, "I think there is a 35% probability of sales remaining stagnant and, in that scenario, the top-line will remain the same. (Any idiot can say that, since if sales quantity is the same and price is the same, then the multiple of the two WILL be the same. BUT, still, it is more impressive to say it - it gives the impression of a dedicated employee who leaves nothing to chance, not even the possibility of mathematics deceiving you from time to time.) We would have incurred additional costs of about 20% of the top-line, due to the increased production and, since our bottom-line is just 10% of the top-line, we will make a 10% loss."

There, now, does that not sound more impressive, more...managerial? Yes, you said, in effect, the same thing - if you produce more and do not sell more, you make losses. BUT - if you speak the same way as you used to at school, how can one consider you a manager? Why did your parents pay those humongous sums of money to get you an MBA?

There is such a thing as going overboard with extending the 'scenario'. For example, you should not go on to say, "If that happens and we make losses, the CEO and CFO will give their coats to the Board of Directors to hold, while they grabbed you by the scruff of your necks and the seat of your pants, and chucked you out on the pavement." If you do extend things that far, you have veered off from scenario 'analysis' and gone on to wishful thinking. YOUR wishful thinking. If you forget yourself and go on like this, you may well find that this part of the scenario gets enacted - with YOU in the central role and YOUR nose rubbed on the pavement.

Ah! No! No! No! THAT's not what happened to me. THAT's not why I am retired. Really, believe me!

22 comments:

  1. I bet you knew that there was a 100% chance that this post will be a hit among the managers and their spouses:) Or anyone familiar with the way people react to any talk with numbers! I am sure you considered all the possible scenarios before posting it.

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    1. I did try to assess all scenarios but I am afraid I am not too good at Scenario analysis :)

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  2. In this post, you have tried to present quite a few scenarios, and in the scenario that regular readers of your post read this carefully, they will be presented with quite a few scenarios in their lives where they can use some of the carefully worded scenarios that you have presented in this post.

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    1. NO numbers in your comment, Jairam! :) Not a good student :)

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  3. I am thinking of what numbers to throw at you. :-)

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  4. The bottom line is that a poor housewife is floundering in this scenario:(

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  5. My boss is a blogger, yet I dare not tell her that I blog too. Also, I dare not share this post with her, lest she fall in love with the pavement idea. Considering the scenario of me goofing up at work, I would not enjoy the experience of having my already deviated nasal cavity choke on aswachh bhartiya road grime.

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    1. Hahaha! Do you intend waiting till it becomes 'Swacch Bharat'? :P

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  6. Amazing how you pick one word and play with it in different scenarios.

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    1. Aha! And you pick that word for a different scenario, Alka :)

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  7. Scenario - you are my word for lifetime. Whenever I want to get things done at home, I will rephrase my thoughts and add you in it. :D

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    1. Hahaha! Life at home will improve by leaps and bounds, Saru! :)

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  8. I know ....talk in numbers and you are among the supreme intellectuals on earth ...talk in simple terms and yes you are a school boy ... You add a graph to prove your statement and you would be the most favored :)

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  9. Ah! Scenario analysis is what I am not particularly good at!
    Pick the attractive scenario that turns out less favored & be doomed! :)

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  10. I loved the percentages bit ! There was really loads of wisdom there :) Waiting to try it out on unsuspecting blokes ;)

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    1. Hahaha! As long as I am counted among the 'suspecting' blokes :)

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  11. Seems like times have changed now. Most people I deal with are not interested in this scenario analysis and stuff. Or it could be because I am an operational consultant and not a strategy consultant.

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    1. Must be the latter :) I can hardly think of strategic discussions without the use of the word scenario :P

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