Value of reserves is a concept frequently missed in the real world.
Think it's good to have all your resources hurtling along at 100% utilization? Think again.
Sounds good, doesn't it. Everything at work on your behalf. Nothing sitting around. Money, people, time. All maxed out.
—what happens when you run into The Unexpected?
100% utilization means you have no reserves. Whether the scope of the issue is big or small, it means you're in trouble.
This is completely contrary to “logical thought”, isn't it! Let's look at a few examples, though, and you'll see the problem right away.
Value of Reserves In The Corporate World
The first instance is one I've witnessed many times in the corporate world. Again and again it has also been brought to me by high level consultants I work with, like a Change Management expert who works with IT firms employing over 1000 people.
The firm has teams that are working on highly technical implementation projects for their own clients.
They have a handful of expert-level staff, who are naturally at 100% utilization. They are busy, locked down on one project or another.
And then something breaks.
Something in another project falls down, and that one expert's attention is not just needed but excruciatingly badly needed over there.
But the expert's plate is already full. There's no more of their time to give. If management's decision is to pull them off the project they're assigned to and put them onto the emergency, what happens?
Hue and cry. Expensive overtime. Unrecoverable critical task delay on Project A. Stress levels up on both projects, in other areas of the organization as well as for both clients.
If the company had planned to have some of their expert resources in reserve, all this would have been much lowered or completely avoided.
Value of Reserves In Your World
OK, Jason, you say. That's a big corporate example. But I run a little business. What about me?
This second example is in your world.
You're a business owner who does it all: sales through fulfillment, bookkeeping and bottle washing.
Your calendar is booked wall to wall and you respect your calendar. There's always something more to do. And your money...well, it's working at 100% utilization for you and there's nothing to spare.
So how can you ever grow?
To improve you need, say, to learn how to use a new CRM. Heck, first you have to pick that CRM. But you don't have time to research. And you don't have the extra money to jump on a deal for software even if you do find something tantalizing. Then you have to find the time to learn how to use the thing!
No reserves. Neither in your time or your money. Equals no maneuverability. No ability to grow. Stuck in the same day after day after day in your business, never working on your business.
My third example is even simpler, from the world of home renovation. A building contractor I was speaking with not long ago blurted, “If only I'd had a little more cash available, this renovation would have gone much more quickly!”
Now why did he say that?
Was he simply wishing for more money? I don't think so. His complaint matched up directly with the things I've seen an experienced elsewhere when it comes to the use of resources.
His problem was not just about buying supplies. It was about scheduling, managing, handling The Unexpected. All adding up to a big headache for HIM.
Understand the value of reserves.
Generals throughout history have known this value: they kept some of their units in reserve to plug gaps in the line and take advantage of opportunities.
Those reserves give you flexibility. They give you the ability to handle problems with lower levels of stress. And they let you move faster.
100% utilization seems to make logical sense. But it'll stress you out, limit your growth, and cause you a great deal of trouble if you pursue it as policy.
>> Jason Kanigan is a business strategist and founding partner of The Closing Engine. To book a two-call strategy & adjustment consultation package with Jason, click here. <<