Managing by the numbers often gets a bad name among employees because it can lead to a lot of gaming the system. For example, most businesses set an annual revenue goal and then manage to that by setting monthly goals. That's smart because a year is just too long to manage. But then they try to get 'smarter' by managing the money at the end of the month. Having a really good month? Defer some of that revenue for the next month. Slow month? Cut expenses and try to get payments in early for the next month and work the receivables hard. Is it bad to do this? I think it is, as I think each month should stand alone. If your team can exceed the forecast by 30%, let them do it and praise them well. Off track for the month? Working to collect receivables should always go ongoing but fine to push, but I'd argue against cutting expenses unless cash flow is negative.
Why not cut expenses? Businesses that spend and stop spending run like a car with a manual transmission with a first time driver. Stop. Go. Jerk. Stop. Go. You've probably seen this at work with a training or travel request where you get the answer 'let's see how it looks at the end of the month'. As long as cash flow is positive, spend your planned spend and move on. Even with a single cash flow negative month I'm inclined to proceed as usual, it's only when I can see a definite change to the forecast that I would adjust budgets.
Another example - not as evil to me - is doing what you can at the end of the fiscal year to manage your tax burden. Usually this consists of trying to bring some of the January expenses (or whatever your first month of next FY is) into December which skews December, but if you do it each year it's predictable (and should be part of your forecast). End of year also tends to be the time when all the left over money gets spent, which as a trainer I like but as a business guy is just horrible - plan what you need to spend, allocate some for unknowns, then spend according to plan/need. If you manage to not need all the money, good! No one wants to pay more in taxes, but I'd rather have liquidity over a few more write offs.
Part of managing by the numbers is deciding which numbers to show the team, because it will influence their behavior. If you set a monthly goal/budget and tell your team to hit it, they will work the system to hit it. Think about that for a minute.
Even if you add a few ground rules to prevent it, it still happens. One of my favorite stories around numbers goes back to my first job in IT, phone support for a computer manufacturer. They had upgraded to a new/fancy phone system that required employees to log in/out on their phone, using various codes to indicate why; break, lunch, bathroom, etc. Each manager received a daily utilization report that showed how each employee did; # calls received, total phone time, time available for calls. At that point I was a faux manager a couple days a week and as I looked at the report and correlated with my knowledge of who was good and who wasn't (you always know who the slackers are!), I could see that we had a couple people that were..shall we say lazy...that scored very well. Hmm, maybe I had the wrong impression. Turns out that they would change their status to 'bathroom', then immediately change back to available, sending them to the bottom of the waiting for a call queue. That reduced the number of calls they received, but they offset that by just taking a lot of extra time on calls they did work (customer service you know). Total bathroom time (yes, there was a number for that) was within the allowed values. We finally figured it out by getting a detail report that showed every state change of their status. Numbers drive behavior.