3 min read

If You Did Your Performance Review Like A Central Bank

This one is for everyone who's wondering what's up with "core inflation" and "transitory" inflation.
If You Did Your Performance Review Like A Central Bank

Boss: Oh hi, come on in. Time for the annual evaluation already, huh?

You (C. Bank): Yep, thanks. Looking forward to it!

Boss: Yeah, so I was looking over your self-evaluation. I see you've given yourself an "Outstanding" rating again this year. I was a little surprised at your rating, to be honest.

C. Bank: Really, why?

Boss: Well, for starters the group sales target was for 5% growth. But you had no growth in sales to your customers, and in fact overall sales in your area are down 2%.

C. Bank: Oh I see, you're looking at the total growth figures! Ha ha, I understand. No, it's better to look at core growth figures, where we grew 6%!

Boss: Core growth? What's that?

C. Bank: Well, that's what you get when you exclude the volatile customers. You know, the ones who don't buy from us every year.

Boss: Uhh, I guess. But I thought our largest key accounts who represent the majority of our sales don't buy from us every year. Isn't that what we pay the sales team for? To make sure we get growth in sales?

C. Bank: Ha ha ha, you are so funny! Including customers and non-customers in the same year would present a totally misleading picture of sales growth. Obviously the only ones it makes sense to include are the customers who actually make a purchase. Otherwise you're comparing apples and oranges.

Boss: Really? That's not how I remember it from business school. I thought growth in sales had to reflect your actual sales figures...

C. Bank: Ah, you know how accountants are. They live in their own world. Just think, if you did it their way, we'd get wildly variable figures from year to year. Anyway, it would be totally unfair to hold the sales team responsible for decisions that are outside our control. We're not living in a communist country, last time I checked.

Boss: Hold it, hold it! We're not talking about communism. I just want to understand how you think shrinking sales by 2% is outperforming?

C. Bank: It's like I explained. If you calculate sales without unfair volatility, and looking just at customers who bought from us, our growth was great, six percent!

Boss: Didn't the company increase prices by six percent this year?

C. Bank: Let's try to stay on topic. We only have 20 minutes before your next meeting.

Boss: Huh? Okay, well let's talk about your operating profit margin. Looks like your expenses were out of control. I still don't understand why the national sales meeting has to be in a ski resort anyway.

C. Bank: Oh, boss, don't bring that up again. We've discussed over and over why we'd be out of business if we didn't fly the sales reps and their spouses to Jackson Hole for a week's partying, er, meeting each year. The market is so competitive...

Boss: Yeah, let's save that for another day. Since we have the same sales meeting every year, that doesn't explain why your costs are up by 10% this year.

C. Bank: Oh, that's just a transitory cost increase, nothing to worry about.

Boss: Transitory cost increase? What the heck does that mean?

C. Bank: Well, costs are higher this year, sure, and just to let you know, I expect they'll be over budget next year too, but after that, I'm sure they're going to go back down.

Boss: Uh, what?! You have an annual target. You missed your target, by a lot. I don't care that costs will go down in two years, maybe. The company has to pay these costs now.

C. Bank: Did you just hear yourself? You can't hold us responsible for stuff outside our control. And anyway, these costs are just transitory. When they come back down, are you going to come back to us and give us a retroactive bonus?

Boss: What are you talking about? You don't get a bonus for missing your target.

C. Bank: Well, I think we'll have to agree to disagree on this one. Oooh, our time is just about up. So, what do you think about my performance rating this year?

Boss: Meets expectations.