Traps in How We Think About Leading: The Case of Focusing Too Much on Budget
January 12, 2011 2 Comments
Thinking About Decision-Making and Choosing Filters: Overdependence on Budget
If we don’t think about how we want to make leadership decisions, then the crisis of the moment becomes our filter for making decisions.
When the economy is unpredictable and profits are lower, the budget is often the crisis that becomes the thinking filter.
It’s dangerous to make important strategic decisions based only on money and short-term crisis. In the case below, see how different the outcome is when using strategic long-term thinking versus crisis-response short-term thinking.
Cutting the Budget - Using Short Term Thinking
We get the mandate from senior management: We have to cut the budget by 15%. If we have not strategically selected our budget items based on the top goals of the company and principles of responsible business, then by cutting, we are hitting blind. In our confusion, we may choose to cut:
- Big Line Items (which may be the most important)
- New Projects (which may be critical innovations)
- Highly Visible Projects (which would impact our reputation in the company)
- Staffing (which would obviously impact our ability to get our work done)
When we cut these areas, we literally cut off our ability to help the organization succeed. We forget why we’re here in the first place. We show our lack of thinking ahead. We prove ourselves disconnected from the company’s strategic future. The outcome is very different if we have been thinking long term.
Cutting the Budget - Using Long Term Thinking
We get the mandate from senior management: We have to cut the budget by 15%. We have only budgeted for items that directly support the organization’s mission, and directly support the organization’s top business goals and directly support our ability to meet those needs with high quality services. Here are some good options for how to cut the budget and still have the capacity to accomplish our mission and goals:
- Since we have used long-term thinking, we have built a high level of trust within our team. They are disappointed by the budget cuts, but don’t see them getting the way. We schedule an innovation meeting, bring in our best discussion facilitator and get to work. By the end of the meeting, the team has come up with 5 ways to cut the budget 15% without reducing the quality of our services!
- Since we have given back unused budget money twice in the last 5 years when we used innovative and resourceful thinking to meet business goals, we can ask if we may skip the cuts this time. When we have proven our responsibility and diligence, and built a high level of trust with company leaders, this may work.
- Because there is no fluff in the budget and we have always managed it honestly and strategically in the past, we can ask senior management which of the top business goals they recommend pulling back resources from. There may be a corporate answer to this question. This could help if the team is not able to come up with creative ideas on its own.
Did You Say to Give Back Unused Budget Money?
“Why would I ever give back unused budget money?” you ask. Here are some very good reasons why you should:
- It’s honest
- It builds trust with senior leaders
- It shows long-term thinking
- It is in the best interests of the company
- It’s not your money
- It may allow you to negotiate keeping money later when you really need it, or keeping valuable employees the next time money is tight
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