Scott Cook, co-founder and chairman of Intuit, has built a huge company helping executives make decisions using his financialsoftware. A big part of managing finances is forecasting budgets and expenditures.
Yet Cook frowns on financial forecasting. In fact, he requests that his employees avoid spending time forecasting the numbers relating to their unit’s sales and expenses.
He has found that trying to predict sales volume is “unforecastable.” He’d rather focus his employees’ time on more productive activities such as innovating and executing the company’s strategic plan. Intuit sells popular products such as Quicken, QuickBooks and TurboTax.
Cook’s aversion to forecasting comes from hard experience. Years ago, he realized that “for every one of our failures we had spreadsheets that looked awesome,” he says.
A team’s enthusiasm to implement an exciting initiative can overwhelm their better judgment, leading them to use made-up numbers to justify their decision. Only later, after a sustained investment of time, money and resources, will their faulty predictions come to light.
When facing important decisions, don’t lean too heavily on forecasts or guesses. As Cook says, “You really cannot know. So why waste the time doing bogus numbers that are unknowable?”
You’ll make smarter decisions by highlighting each key assumption that you make. For example, you might assume that tax laws—or economic indicators such as inflation—won’t change in the year ahead. Listing your assumptions can help guide your decisions more accurately.
— Adapted from The First Mile, Scott Anthony, Harvard Business Review Press.