“Faith-based spending” is when you spend your money without really knowing if you are getting any benefit from it. In a business it is when you fail to apply rigorous metrics or do not go back and analyze the results. We recently spent $10,000 on a cool, jazzy bus wrap and offered a discount to new renters who brought in a picture of it on their cell phone. It may or may not have generated buzz (that is a soft metric, some of the site staff seemed to think it did) but it only generated 20 or so discounts (a hard metric). That worked out to a cost of $500/bedroom lease or more than a month’s rent, certainly more than than annual profit (total marketing/advertising costs are generally in the range of $70 to $150 per bed).
A governmental example of faith-based spending occurred a while back in Florida when for a while the legislature thought it would be a great idea for every automobile to undergo annual safety inspections. Huge inspection stations were built all over the state and citizens spent their lunch hours and weekends sitting in their cars waiting to pay the fee and get their inspection stickers. It seemed like an obvious way to make the world a safer place. But after a few years it became clear that “the emperor had no clothes” and accident statistics hadn’t budged an inch. The legislature saw the light and pulled the plug, thank god.
There is certainly a place for professional judgment; some of my senior staff feel (very) passionate about the above bus wrap (and mailers with only slightly better hard metrics). I’ve overridden the numbers at times and gone with my gut. The point is
* Always, ALWAYS try to find a good way to quantify, measure and analyze (avoid faith-based spending)
* Get really humble when you choose to override the numbers
* Get very nervous when you find yourself consistently overriding or ignoring or (the worst) not calculating the numbers
* Counter-argument: be very aware that some things ARE difficult to measure and people can waste a lot of time creating numbers to justify what they want to do.
Closing quote:
“Not everything that matters can be measured, not every thing that can be measured matters.”