The Data That Does Not Add Up
A consultant is building a business case for a client's $2.1M automation investment. The client's operations manager supplies a spreadsheet showing a 32% labor-cost reduction, which drives the payback to 14 months. While reconciling figures, the consultant notices the labor baseline includes overtime that the automation will not actually eliminate, and that the 'reduction' double-counts a shift that was already being outsourced. Correcting both, the payback moves to roughly 31 months. The operations manager says the spreadsheet is 'how we've always done it' and that the 14-month figure is what the CFO expects to see. The consultant has 3 days before the investment committee meets.
1. What should the consultant do with the corrected figures?
Read the worked answer
Present the corrected figures and explain the difference transparently to the investment committee.
Reasoning:
- The two errors are not rounding; they change the central conclusion (14 vs ~31 months payback). A business case built on a double-counted shift and non-eliminable overtime would mislead the committee on a $2.1M decision.
- 'How we've always done it' describes a habit, not a valid method. The consultant's value is precisely to catch this.
- The consultant should not ambush the operations manager either. Professional courtesy means surfacing the correction to the manager and the CFO before the meeting, with the reconciliation shown.
Actions: (1) Document the two adjustments with the arithmetic and the source of each. (2) Meet the operations manager and CFO to walk through the reconciliation before the committee. (3) Present a range, not a single number, and state the assumptions the payback depends on. (4) If the committee still wants the 14-month case, it does so knowing the corrected analysis - that is the client's call, made on honest information.
2. The operations manager asks the consultant to 'just use our numbers and note your caveats in an appendix.' Is that acceptable?
Read the worked answer
No - not if the headline conclusion would still rest on the flawed figures.
Reasoning:
- Burying a conclusion-changing correction in an appendix is a form of misleading presentation. Decision-makers read the headline; a caveat they will not see does not cure a headline that is wrong.
- The test is whether a reasonable committee member, reading the main case, would be misled about the payback. With 14 months in the body and 31 in an appendix, they would be.
Acceptable alternative: present the corrected payback as the headline, and use an appendix or sensitivity table to show the client's original figures and why they differ. That respects the manager's wish to preserve the original analysis for reference while keeping the decision honest. If the manager refuses, the consultant should state in the report which figures are the consultant's and why, and be prepared to say so to the committee directly.