Best Practices in Lean Six Sigma Process Improvement: A Deeper Look

Chapter 9. Vengeful Numbers

The management system that for decades has dominated big business, particularly publicly traded companies, is described by these related terms: management by the numbers; top-down management; and command-and-control. Under that system, some companies employ vigorous earnings management, which means manipulating plans, goals, resources, and programs to achieve targeted earnings rather than putting best feet forward and seeing what earnings ensue.

The price companies pay for numbers management can be high.^[129] Hope and Fraser, in Beyond Budgeting, report on the annual planning and budgeting that starts the numbers cycle:

The average time consumed is between four and five months. It also involves many people and absorbs up to 20 to 30 percent of senior executives' and financial managers' time. Some organizations have attempted to place a cost on the whole planning and budgeting process. A 1998 benchmarking study showed that the average company invested more than 25,000 person-days per billion dollars of revenue in the planning and performance management process.^[130]

Those costs are just for initial planning and budgeting (which, according to another study, influence only 2.5 major decisions per year^[131]). The costs balloon in the quarterly review and control phases, preceded by monthly data collection, reporting, and review.

Besides the cost, the system has acquired a reputation for ruthlessness: Make your numbers or you're out. While some of that does occur, ...