by Stever Robbins
Did you see Titanic? The movie, not the ship. I did. My favorite part wasn't the love story, though. Human emotions are messy and unpredictable. My favorite part was when the ship had hit the iceberg and the engineer comes up to the Captain and says, "We are going to sink. It is a mathematical certainty." Numbers are precise and predictable. That's cool!
What's even more cool is that he could predict this as the ship appeared to be doing just fine. Everyone was still dancing and eating dinner and having a jolly good time. Even the poor third-class passengers who were locked in steerage trying to catch mice for dinner, were partying. And all the while, it was a "mathematical certainty" that they were going down.
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As my recent episode on The 30/3 Rule shows, you can use simple math to understand the mathematical certainties of the world around you. Some of these are fun certainties. Others, you'd really rather not know about.
Today, I'll share 4 ways you can use simple math for profound insight. Math Dude would be proud!
Tip #1: Calculate a Breakeven
When I work with business clients, whether they're entrepreneurs, corporate executives, Boy Scouts, or Girl Scouts, I teach them to calculate a breakeven. Breakeven tells you how many of something you must sell to cover your costs. Simply divide your cost by the money you make selling something.
People tell me I should make a
app. Apps are where it's at. Let's say I want to make $50,000 per year. If I can sell my app for $5 (which is expensive for an app), I need to sell $50,000 divided by $5 or 10,000 copies. That's a lot of copies. But let's pretend I have a diabolical marketing plan that can pull it off.
Now I just need a programmer and designer. I scout around and determine they will charge $20,000 to build an ingenious app. To pay for that, requires an additional $20,000 divided by $5 or 4,000 copies sold. My marketing plan may be diabolical, but it's not diabolical enough to assume I can go from 10,000 units sold to 14,000 units sold. That's a 40% jump, just from hiring two people. Breakeven analysis tells me how much I must boost sales efforts to cover the extra costs.
Next time you hire a new employee, calculate the breakeven for their salary. Then you can say, "To pay for your salary, we need to sell an additional 32,916 razor blades this year." Once they feel guilty enough, ask them to buy you lunch. Everyone wins. Or at least you do.
Tip #2: Recover From Schedule Slips
When you miss a deadline, it's natural to want to make it up. But most of us vastly underestimate how hard that is. If you miss a deadline by two days, how long will it take you to make it up? Assuming you work 25% overtime—that's two extra hours—a day, it will take 2 days divided by 25% or 8 days of overtime to catch up.
[ You should have milestones every 3 days.]
That's why you should have milestones every 3 days instead of every week. That way, at most, a project will only slip 3 days before you know you're late.
If you drop 3 days behind, it takes 3 divided by 25% or 12 days of overtime to catch up. But if you lose a week without realizing it, that's 7 divided by 25% or 28 days of 25% overtime to get back on schedule. That's not likely. No one can sustain 25% extra productivity for 28 days. So a schedule slip of 7 days guarantees it's time to lower your sights.
Tip #3: Recover From Pink Slips
Speaking of lowering your sights, let's move from schedule slips to pink slips. And not the Victoria's Secret kind.
Many companies manage headcount by over-hiring when times are good, then just issuing pink slips when they need to cut costs. (Then they write me asking how they can regain the trust of their surviving workforce. As if!) Then they compound their incompetence by keeping the same goals and expecting a reduced workforce to reach the same targets the full workforce couldn't reach. This is called "magical thinking."
How magical is it? Divide the number of laid-off people by the number of survivors. That's how much extra work everyone needs to do to hit those numbers. Let’s say a 90-person division lays off 10 people, keeps 80, and doesn't change their goals. That gives 10/80 or 12.5% more work for each of the 80 people. That's an extra hour a day, every day, forever.
It's way more realistic to lower goals by 12.5%. Yes, it will hurt your boss's ego to go after a lower goal. But frankly, it should have hurt their ego more to have had to lay off 12.5% of their work force. If they feel bad enough, they can always lower their salary to bring back an employee or two. No? I wasn't holding my breath, either.
Simple math will help you understand the adjustments you need to make when headcount changes.
Tip #4: Monitor Progress
Sometimes you have hugely repetitive tasks that just need to get done. Take Bernice, she’s planning to hand-address 4,000 wedding announcements for her upcoming nuptials. She's only planning on inviting 100 people to the wedding, but she wants everyone in her address book to share her joy. Just not her ceremony. If the announcements are scheduled to go out in 8 days, she has to hand address 500 announcements a day to stay on track (that’s 4,000 announcements divided by 8 days). She’s done her math, so if she addresses 600 announcements on day one, she's already ahead and can slack off on the day when her carpal tunnel acts up.
Simple math is deceptively simple. But it can tell you ahead of time how much you need to sell, how easy it will be to recover from schedule slips, how you must adjust your goals when headcount changes, and how much progress you're making.
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I help technologists master entrepreneurship and general management by helping them learn how to navigate the people issues involved in leadership. If you want to know more, visit http://www.SteverRobbins.com.
Work Less, Do More, and have a Great Life!