Lauren Fleshman is an elite-level American track and field athlete. She was the U.S. 5,000 meters champion in 2006 and 2010. In the 2011 IAAF World Championships, she equaled the highest-ever finish by an American woman in the 5,000 meters.
She finished 12th in her first marathon, the 2011 ING New York City Marathon. She is a Nike-funded professional athlete. How and when this came about is the point of this column.
In her junior year of high school, she was a top-20 two-mile runner and earned a trip to the Olympic Training Center in San Diego. She was excited to learn the results of her testing at the center. She was the second-fastest runner in the group and expected to be told she had great potential. As it turned out, she was graded as mediocre. She was the worst girl at the center.
She reported this experience in the current issue of Runner’s World. She has been tested several times since, and the results have been the same. Her 5-K potential is 35 seconds slower than the time she has actually achieved. Her actual time is 11 seconds faster than the scientific tests concluded she could run.
That’s an incredible difference. It’s also proof that numbers can’t measure everything.
In one regard, running is similar to business. Much of running is quantifiable. As a result, much of training is based on numbers – distance, pace, repeats and recovery. The business world is also full of numbers, statistics and ratios. There are databases to help compare a business with its peers. Just like runners, business owners and advisers can be lulled into thinking everything can be measured and run by the numbers.
Numbers replace judgment, and that is where the danger lies and poor decisions are made.
Clients are often surprised to learn I don’t offer advice and guidance based solely on the numbers. I’ve often stated that no truly important decision can be made based on numbers alone.
Judgment must also be part of the process. As an example, a required sales level analysis, or RSL analysis, can tell us that selling 1,000 units per month priced at $25 per unit will result in monthly income of $25,000 and net profit of $4,000. The calculations are unassailable. The numbers have spoken. What the numbers cannot tell us, however, is whether customers will pay $25 for each unit or whether they will buy 1,000 units each month. Such conclusions must be based on experience and judgment.
None of this means that numbers are useless and should be ignored.
Numbers can get us in the ballpark. For example, industry ratios may tell us that firms in a given industry have an average gross profit margin of 45 percent. Based on that statistic, we can probably assume that we are off base if we must have a gross profit margin of 55 percent. Our expectation is too far off the mark.
However, we must rely on judgment to decide if pricing at a 48 percent of gross profit margin is reasonable. In the final analysis, the marketplace will prove us right or wrong.
Lorna Fleshman goes on to say that quantifiable data is a valuable tool, but it is just a tool. Combine your numbers with your judgment and experience, and you’ll improve your odds of success.
Bowser@BusinessValueInsights.com. Dan Bowser is president of Value Insights Inc. of Durango; Chandler, Ariz.; and Summerville, Pa.
