“Trust the process” is a cliché.
But it’s one I believe in.
I was listening to an interview that Scott Galloway did with Barry Ritholtz of Ritholtz Wealth Management and I was intrigued by what Barry said about process:
“People confuse outcomes with process.”
There is so much great truth to unpack in that 15 second segment. You can watch the full interview here.
One of the great points Barry makes in the interview is that sound investments can be made after huge selloffs where processes are still valid.
Processes exist within every organization, whether realized by the stakeholders or not. The best companies know this stuff and maximize it to their competitive advantage, building core processes to improve their effectiveness, manage their controls, and support their bottom-line.
I could write pages on the power of process because it fascinates me, as does the theory of marginal gains. But I won’t do that here.
My takeaway from Scott’s interview with Barry was this:
- It’s important to understand that outcomes are always occurring, both with and without valid processes. Don’t confuse outcomes with process.
- You can, in fact, have excellent outcomes with very poor processes and vice versa. Don’t confuse outcomes with process.
- Additionally, you can have very poor outcomes with valid processes, and vice versa. Don’t confuse outcomes with process.
- But statistically speaking, the probability of having successful outcomes where valid processes exist is greater than where they do not.
- So what? Valid processes mitigate risk. That is the point.
Merriam-Webster defines risk as:
The possibility of loss or the degree of probability of such loss.
Risk is one of the great lessons small business owners learn. What’s interesting to me is the various levels and dimensions of risk.
One of the first steps we take with our customers is to assess the risks in their business as they relate to financial management processes. Implementing and honing sound financial management processes in your business is critical to mitigating risk and betting with the odds of successful outcomes, as Barry alluded to in his interview with Scott.
We too often see companies that have found their niché in a market and are generating revenues on a poor financial management foundation. These foundations have severe limits and with certainty they crumble with time. Crumbling financial management foundations have outcomes that look like this:
- Revenue plateaus;
- delayed invoicing and collections that crush cash flow;
- vendor bills that seem to appear out of nowhere, also a blow to cash flow;
- missed payments and overpayments to suppliers and contractors;
- lagging or negligent information sharing between team members;
- and high personnel turnover to name a few.
Valid processes mitigate risk. “Trusting the process” means building them, first.
Cheers!