In a meeting the other day, an individual mentioned getting a supplier to manage their margins. In business, margin management can mean different things to different functions. To a program manager it is the process of looking at risk from a margin perspective, addressing costs and revenues together as a single unit of risk. Looking at profitability of an operations decision are made off of the bottom line or how much money is being made. For a design engineer, margin management may involve looking at factors of safety where a system is evaluated for expected loads beyond the structural capacity. Reserve factors are taken into account. For an investor margin management may be an examination of the additional benefits of an activity compared to the additional costs of that activity. A margin is an amount by which a thing is won or falls short. It is the lower limit of possibility of success. No matter what the perspective, margin analysis and management is a valuable decision making tool helping to maximize a situation.
In the recent post on minding our gaps we discussed how there is a gap between what we want and where we are currently in life. Relative to the business of you, margin management is the recognition of what it takes to bring about what we intend. It is a recognition of where we are versus where we want to be and working with one’s available resources to create the desired outcome. To do so, we have to plan. Depending on how large the gap is, we may have to develop both tactical and strategic plans to create what we intend. With planning in place we have to do what it takes to make it happen. Like all good plans, we will have to adjust our actions to adapt to the opportunities that reveal themselves. This takes an unending focus on what we truly want while allowing our situation to unfold as it may. We have to be flexible.
As an example, knowing we want to get a raise, we have to learn the expectations of our boss and those we interact with at work. We also need to understand what our current performance is and compare this to the expectations for getting a raise. The gap between our current performance and the performance needed to get a promotion is the margin we have to manage. Out of this gap we can set goals for ourselves that exceed the expectations of those who have decision authority for our promotion. This is personal margin analysis.