Blue Elevator Blog

Change is Multi-Dimensional

When it comes to making decisions, it’s important to realize that change is multi-dimensional.

In life and in business, we often come to a crossroad or a decision point.  We try to weigh the pros and cons – and then, make the best decision possible.  And it is here where we pause for caution, as not every decision has its desired consequence or outcome.  Or, rather, the decision itself introduces some other unintended consequences.  Change is multi-dimensional.

The ability to make good decisions involves thinking through the ripple effects.  We need to evaluate the down line consequences of a decision.

A Real-World Example

Recently, in various states, there has been legislation to dramatically increase minimum wage.  Regardless of your politics, I encourage you to put that aside as we assess this real-world example.

The Intended Consequences

At face value, increasing minimum wage is a good thing, right?  Paying people more money should give them more disposable income.  Having more income means that they will have more money to spend.  Spending more money should result in more business for merchants.  More business for merchants should mean more profits.  And more profits means more hiring.  This is the desired outcome.

The Unintended Consequences

From both reports and my personal observations, here is what has been happening:

State governments, in a desire to help raise the standard of living for people, dramatically increased minimum wage.  As most businesses operate on razor-thin margins, the magnitude of this increase left employers with a great challenge.  From the organization’s viewpoints, this upset their equilibrium point.  Without the ability to immediately absorb this large, mandated increase, employers had to make offsetting adjustments.

Here are some of the possible adjustments.  I will present them, and I will respond to them in the employer’s “voice.”  For simplicity, let’s assume the employer is a restaurant.

• Raise prices.  (But, I know will lose customers who are already strapped and may not be able to pay more to eat out).
• Cut costs somewhere else in the organization.  (If I sacrifice on the quality of my ingredients, then people won’t like the food as much and may go elsewhere).
• Cut employee hours.  (I will just have to either layoff some workers or I will have to reduce everyone’s work schedules.  I will keep my labor the same and reduce hours by the amount I need to offset the increased wages I have to pay).
• Adjust operational hours.  (I will have to reduce my operating hours to absorb the increased wages.  But, I know I will lose business.  The hours I cut from my day will cause me to lose certain customers that come in during the times I will be closed).

Some restaurants may have raised prices.  Some may have reduced employee hours or laid off workers.  Some may have even closed their doors.  Some may have reduced operating hours.

There are reports now of restaurants implementing “surcharges.”  Instead of increasing menu prices and printing new menus, restaurants are merely adding an extra line item to people’s tabs.  An extra x% to help cover the extra cost of wages.

The Net Result

To oversimplify things, let’s just say the outcome may not have been what the politicians intended.

In a desire to help the target demographic, they may have actually hurt wage-earners.  Some may have lost their jobs altogether.  Some didn’t realize an increase.  They were paid more per hour, but had their work hours reduced.  And, seemingly, most would have had to pay more for goods and services as some vendors increased their prices.  So, their wages lost purchasing power.

Perhaps you, the reader, may have begun to see some other offsetting changes.

• McDonald’s is adding kiosks where you order and don’t speak with an employee at the register.
• Starbucks is “influencing” customers to order through their phone app.  You don’t have to stand in line and order through an employee at the register.

What, Why, and How

For those familiar with the Blue Elevator™ advisory platform, we do our best to offer and extend a multi-faceted approach to decision-making.  We want our clients to experience the desired outcomes – without the unintended consequences.

In our experience, you have to get it all right.  Meaning, you have to know the right What, the real Why, and you have to go about it the right way (e.g., How you go about it).

In the real-world example above, raising minimum wage isn’t a bad thing.  The What and the Why of that decision is fine.  The error was in the How.  A few things:

• The timing of the mandate was questionable.  These mandated changes came at a time when a lot of businesses were struggling to keep their doors open.  If business was booming and profits were abound, then absorbing the increase may have been easier.  Though, I will contend, that offsetting adjustments would have still been made.
• The magnitude of the change (in some locales) was too much.  In some area(s), instead of a long runway of anticipated changes over time, the rate of change was seemingly too drastic.

There’s an old saying or story about boiling a frog.  If you place a frog in a cool pot of water and, gradually, raise the temperature, then you can boil the frog.  The frog will hardly notice the almost imperceptible temperature increase and will be content to hang out.  However, if you were to throw the frog into a hot pot of water (or raise the temperature too quickly), the frog will jump out.

The take-home message is this: often times, how you go about things could mean the difference between success and failure.

Peter F. Drucker is credited with this quote: “Culture eats strategy for breakfast.”  This is cause for careful concern when making decisions in business.

Summary

Business is not one-dimensional.  You really have to think long and hard about decisions and try, as best as possible, to identify the outcomes (and the unintended outcomes).

At Blue Elevator™, we help our clients build various models for assessing change.  Then, we try to break and improve those models.  The goal is to implement a change that will bring about its desired outcome without creating unanticipated harm.

Go and do likewise.  So remember, change is multi-dimensional.  Contact us!  We’re here to help.