Does the end ever justify the means? Well, maybe sometimes-not by the use of illegal, immoral, unethical or violent means, of course, but in a limited way if something good might be achieved. There have been many long (and often boring) philosophical discussions over the years about this general subject, but consider the following actual business case and decide for yourself.
In a multi-state area at the end of a very long supply line, a gasoline marketing company was experiencing a frustrating year-after-year decline in market share. Never the largest marketer, but a historic and proud competitor, the companys stations were older and on smaller lots with limited frontage. New highways had bypassed many of them, and nearby neighborhoods had decayed, resulting in lower gasoline volumes and fewer customers for inside work. It was getting difficult to find competent dealers to operate these stations.
A sizable gasoline service station development project needed to be launched if the company were to continue to do business there, but no one was sure how the necessary capital could be justified in view of the chains continuing deterioration.
Finally, after years of local requests, management in the companys distant headquarters decided to gamble, and a special capital budget was approved. Real estate representatives, chosen from the current sales force, were charged with finding new locations, negotiating land purchase or lease agreements, securing zoning and permits, and following up on construction. A formal procedure for economic analysis and periodic review was put in place to evaluate progress.
The calculated percentage return on investment for each station had to meet the minimum criterion set by headquarters. That critical number was the direct result of estimated gasoline volume, which turned out to be more of an art than a science. There were limited hard statistics available, and those could easily be outweighed by the potential quality of future dealers.
The reps soon learned that high land costs in prime locations made it impossible to justify new stations unless they could pump much higher volumes than their existing chain. So what to do?
There was much discussion of various methods of justifying unusually high volume estimates, but often the answer was just to work the economics backwards to see how much volume was needed to meet the minimum return. No one was happy doing that, but it seemed that the end, a continued marketing presence, justified it.
Everyone hoped that luck would be with them in the form of exceptional station operators. They knew they would catch holy hell at future review sessions for any locations that did not meet estimated volumes. It was tacitly understood, but not discussed openly by management, that some locations bore estimates that might be difficult to reach. But survival was paramount; they were willing to take the heat in order to ensure a continued market presence.
A final note: Maybe the end in this case did justify the means. After several years, total new station performance usually averaged over 90 percent of estimates because some large winners successfully offset the dogs.
But tell me, what would you have done?
Jack Goodhue, management coach, may be contacted at goodhue@aol.com.