Pound-Foolish

Remember when you were a kid, and your grandmother or great aunt or whomever you got your truisms from told you something was “pennywise and pound-foolish?” It’s funny how often the failures in management I see in my daily life are caused by people who were never taught that saying, or at least, don’t understand what it means. One very common mistake is blindly adhering to a general rule that does not fit the current circumstances, such as insisting that a bunch of minor alterations to the same garment have to be billed separately at full price – an example I have referenced in an earlier post called “Rules Are Rules!”. You will also see people adhering to procedures that they know are not applicable, such as operations that are appropriate to the date but not to the actual weather, or to the hour but not the circumstances (e.g. closing routines when the establishment is not in fact closing at the time).

Mostly there are just people who are either too lazy to respond to actual conditions, too afraid (rightly or wrongly) of higher management to risk making an independent decision, or too stupid to realize that winning an argument is a poor compensation for losing a customer by doing so. But the other day I encountered a literal example of the old truism; a decision that was almost literally wise in considering the cost of materials by the penny, but foolish in the number of pounds the business will not be able to sell. Strangely enough, it came up over lunch.

Around the corner from my house there’s a little Mexican restaurant – basically just a range top, a grill, a drink machine and a seating area. It’s one of those places that makes its own salsa fresh every day, and has large bowls of different flavors set out on the counter so you can have as much as you like for your food, with your chips, or whatever. I really like the fresh, mild, chunky salsa; they use crisp onions, fresh tomatoes, potent cilantro, and so on, all made fresh. I like to go there for lunch sometimes, usually after the lunch crowd has dissipated and it’s quiet. I’ll order something with grilled steak that comes with chips, and sit and eat them with the fresh salsa.

The other day when I went by, however, I noticed that the salsa wasn’t its usual quality. It’s not that it was off (I checked very carefully), it’s just that the tomatoes were a bit too squishy when they were chopped. As a result, instead of a mixture of distinct vegetables, what you had was a mass of mashed tomato with bits of other things sticking out of it. It didn’t taste as good as it usually does, either. I still enjoyed my lunch, but it was not as good as the usual experience.

You can tell what happened, can’t you? That morning, when they went to make the salsa, the tomatoes on hand were not as fresh as you’d like, and whoever was in charge decided to go ahead and use them anyway. After all, that was probably $5 or $10 worth of tomatoes, and you wouldn’t want to waste them. I’ve seen people from their corporate office (it’s a small chain with a half-dozen locations) coming through the place lately, waving clipboards and asking lots of questions about waste and costs – probably because this location is a bit out of the way, and it doesn’t get as much traffic as some of the others. So I’m sure someone decided to make the bean counters at corporate happy and save $5 on ingredients.

Except they may not have. I’ll probably go back and give them another try, because I really like their food when they’re on their game. But anyone who came in for the first time that day probably won’t bother – there are at least five other chains in that market segment, and ALL of them have locations with a couple of miles of this one. Even I may stop coming back there if they continue to fail to meet my (admittedly rather modest) needs.

The point is, my lunch alone – one lunch, one time – costs more than the $5 or $10 they saved on tomatoes that morning; losing my business altogether could easily cost them $1,000 per year. If I tell all of my friends (or mention the establishment by name in this space) the effect could easily be ten times that. Sure, they saved $10, but they could easily have lost $10,000. I’d have to call that pennywise and pound-foolish…