“We are doomed to choose, and every choice may entail an irreparable loss.” – Isaiah Berlin, “The Pursuit of the Ideal” (1988)
An order comes in from exactly the kind of customer the business decided some time ago to move away from. The month has been disappointing and the pipeline looks thin. The margins on this kind of work are low, and every job draws the service team away from the customers the business had chosen to serve, but the order is a decent size and the month needs it.
Nobody arguing for it is being unreasonable, and most owners I’ve worked with would say, honestly, that their business has strategic discipline. In a good year that’s easy to believe, because keeping to the agreed direction costs very little. It gets harder when holding to it has a visible price, which is usually around now, with the year nearly done and the figures not where anyone wanted them to be.
Anyone can tell you what their strategy is. What the business turned down this quarter, when turning it down cost real money, tells you what the strategy really is.
When Saying No Starts to Cost Money
In a comfortable year, a strategy and a preference look almost identical. The business turns away the awkward customer and the job at a silly price, which feels like strategic discipline, but there’s plenty of better work about, so turning those down costs nothing.
The difference only shows when there’s a price attached. If a business has never turned down anything expensive for the sake of its strategy, the strategy hasn’t really been tested. It’s still a preference, and the first real price for that strategy usually falls due in a quarter like this one.
There’s Always a Good Reason for One More Exception
What makes a tough quarter so testing is that the arguments for saying yes to exceptions are usually good ones: the customer can pay, the discount brings revenue into this month, the tender would keep a team busy. Nobody is proposing to abandon the strategy, and each case, taken alone, is perfectly sensible. They’re just all about this quarter.
In a distribution business I led some years ago, we had standing minimum margins, and any large deal that came in below them needed sign-off. We weren’t just looking at protecting margins. We looked at the payment terms on both sides, when the supplier’s payment was due and when the customer would actually pay us, because a very large order on the wrong terms could tie up far more cash than the margin was worth. And we looked at the vendor’s back-end rebates, including whether the deal would take us over the quarter’s target and release a bonus we’d otherwise have missed, which could change the real margin completely.
Sometimes the answer was yes, and it was the right answer, while at other times the attraction disappeared once we looked more closely. What mattered was that the exception was a decision, made with its whole cost in view, rather than something we slid into because month-end was close. Where that habit is missing, strategic discipline is rarely abandoned outright. It wears away, one reasonable exception at a time, quite often in the last few days of the quarter.
The Numbers Still Reward the Business You’ve Left Behind
Take, for example, a specialist services business that has agreed on a sharper strategic focus: higher-margin work rather than volume. The managers have understood it and they’re acting on it, turning down low-margin jobs they would once have taken without thinking. But the monthly review still opens on turnover against a target set before the change, so every month the people doing exactly what was agreed have to explain a shortfall the agreement itself created. Nobody disagrees with the strategy, yet the job refusals go on trial every month all the same.
Each month the owner faces the same choice: stand behind the refusals and accept a weaker figure while the new work builds, or let it be understood that a few of those jobs would be welcome after all, just to keep cash coming through. The second is rarely announced. It shows up as a softer tone in the review, or a question about why an order was turned down when the month was already behind target, and the managers draw their own conclusions.
When the business first set its direction, the hard part seemed to be choosing which growth opportunities to pursue. It’s keeping that choice that costs money. The discounted price becomes next year’s starting point, the off-strategy customer turns out to need more service time than anyone allowed for, and bit by bit capacity drifts back towards the work the business chose to leave. That’s how the business ends up back in opportunistic growth without any formal decision that it should.
Protecting margins was the whole point of the change, yet a few years on, a buyer reading the books may see a respectable revenue figure alongside a mix of customers and work that makes the quality of those earnings far less attractive. Each yes given under pressure also becomes one more commitment someone will eventually have to end, and ending the commitments already taken on is a good deal harder than declining them in the first place.
What Never Appears in the Results
Management reports are good at recording what was won, signed and added, but much less good at recording what was deliberately turned down. There’s no line in the pack for the declined order, and no slide at the quarterly review to set against the ones headed “wins” and “losses”. The decisions that show most clearly what a business actually stands for leave the least trace.
Research into Germanic Mittelstand firms makes much the same observation: companies tend to be judged on the strategic choices they made, while the ones they decided against stay largely out of sight. The authors see resisting short-term temptation as part of what they call strategic discipline, and they’re candid about its limits. When conditions change fast it can be the wrong approach, and it can hold back growth.
Changed facts can justify a changed answer, and when a business genuinely needs the cash to keep going, taking the work is a decision, not a lapse. But the discomfort of following a strategy doesn’t, on its own, prove it wrong. For the specialist services owner, the declined work has a visible value this month, while the work the new strategic focus was meant to bring in is still building. That gap is the real price of the refusal, and it’s paid before anyone knows whether it was worth paying.
In practice, holding an agreed direction when trading gets difficult comes down to one refusal after another, and the people closest to the work aren’t always the ones who get to make the decisions. A large tender arrives, of the kind the business stopped chasing years ago, and it lands on the owner’s desk because nobody else wants to be the one who said no to that much money.
Ten Months Into a Long Year
That owner, deciding whether to back the managers or bid for the tender after all, is ten months into a long year too. Holding the line in October costs more than agreeing to it in January, when the plan was fresh and nobody was tired. That tiredness is part of what makes a strategy under pressure so hard to hold on to.
Show me this quarter’s refusals and I’ll tell you the strategy. If there aren’t any, that’s also an answer.
So what did my business turn down this quarter that actually cost it something? And if I’m struggling to think of anything, is that because everything fitted, or because nothing was ever really asked of the strategy?
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