"Willful Blindness" - A Business Consultant's Take by Guest Blogger, David Rudofsky
Friday, May 13, 2011 at 9:00AM by Richard Magid I read Michael Gerber's eMyth Revisited about the time I started my consulting practice in 2003. At the time I felt that it gave me a roadmap to success. The book's opening chapter describes a woman who loves to bake, and her friends all agree "you should be running a bakery." So off she goes. She soon becomes overwhelmed by the managerial requirements that come with owning a bakery, taking her away from her true love and passion: baking pies.
"Simple," I thought, "I'll help resolve this disconnect by assisting my clients on the managerial side of the business so they can continue to 'bake the pies.' And there will be an educational piece to my practice too: I will teach these bakers just enough about finance so they can be better-rounded managers."
But as the years went by, and I gained experience as a consultant, I realized there was something deficient about this model; some of my clients had a real aversion to learning how to manage the financial side of the business. Some even avoided hiring someone to do it for them! There was the entrepreneur who did not file tax returns for numerous consecutive years, with the thin justification that they were loss years so they didn't owe any money; but he put himself at risk of losing valuable tax-loss carry forwards. Then there was the maker of high quality organic desserts who couldn't get her partner to create a "bill of materials," and consequently did not know if some products were being sold below cost. As well as numerous instances of people thinking about starting, or actually starting, businesses without having a clear idea of how much capital it would take them to get to positive cash flow. This systemic avoidance went well beyond what was described in eMyth.
Fortunately, Margaret Heffernan has written Willful Blindness and I find it provides a deeper psychological/sociological explanation for why business owners are blinding themselves from the positive results of proper financial management. Figuring out whether the business is going to make a profit, what to do if it isn't going to make a profit, where to find money to pay quarterly estimated taxes, etc. is not likely on the top of any business owners "to-do" list. Putting off these kinds of activities for a day or a week may seem acceptable behavior, but as Heffernan writes, "All of us want to bury our heads in the sand when taxes are due, but in trying to pretend the threat doesn't exist, and we don't have to change, we are… trying hard to avoid conflict."
Client education will continue to be an important aspect of what I do and I will continue to ask myself whether individual clients are truly coachable in financial literacy or not. I'm at a point when I can no longer keep my head in the sand when it comes to business owners who are not willing to get into the financials, because your business is too important not to look at the financials, and mine is too.
David Rudofsky is president and founder of Rudofsky Associates, a consulting firm dedicated to helping businesses solve financial and strategic issues. Clients have been across a wide range of industries, including food and beverage, manufacturing, education, healthcare, publishing and not-for-profits. Visit www.rudofskyassociates.com for more information.
Reader Comments (1)
Far too many people thinking of starting a business or actively starting a business are what Michael Gerber refers to as "technicians". Technicians love what they do and believe that they can love what they do and run a business doing this. Wrong.
The willful blindness is a symptom of the real problem which is they should stay doing what they love. Running a business has less to do with the technical side and more with the marketing, sales, finance, operations, etc. I tell all clients that 80% of all businesses ar the same since much of a good entrepreneurs time is the business of running the business.
Consultants are in a helping profession and it is our charge to help people. However you are spot on that a number of clients are not coach-able in financial literacy. Those clients should consider working for someone before they run into serious financial problems or worse, going out of business.