We have been living with cost control strategies for so long that it is easy to lose sight that there are other strategies beyond doing ‘more with less.’ Recently I have been in a number of meetings with executive team’s where despite their best intentions, they are leading their company via cost rather than strategy, which is like steering your car via the gas tank.
The analogy is apt because it gives the illusion of independence. “Go as far and anywhere you want for as long as you want, until you run out of gas.”
An army runs by its stomach and a company runs by its budget, not its strategy, nor its operations, nor its ideas. All of this despite the management literature about leadership, strategy and innovation – if it is not in the budget then it does not exist.
Budgeting may be complex as a discipline but it is a crude management technique and often a sign of weak management. Steering the business via the budget reflects the triumph of inside-out control over outside-in value creation.
Budgeting is too often a process of subtraction and subjugation that on the surface appears reasonable – after all you should not spend money you do not have.
There is nothing intrinsically wrong with budgeting. The budget is not the thing, rather it is the behaviors behind the budget that lead you to stop looking out the windscreen and look down at the fuel gauge, lose sight of the strategy and forget the future you seek to forge.
Signs that you are steering your business via the gas tank include:
- Limiting your choices, actions and incentives to what is in the budget that was set months or even a whole year in the past. Things change, so your options should be able to change. No budget can know the future perfectly; if it did then those making the budget should be picking stocks not picking through accounts.
- Restricting resources that result in starving business units to keep them in line with corporate plans. The corporate center establishes a co-dependent relationship with its operations in the edge through this process, particularly in situations where any individual edge is kept smaller than the center.
- Raiding resources from one business unit to support another. Cross subsidies is a complicated business and political issue that too often imposes a ‘good management’ penalty on those who are able to meet or exceed their goals. If good mangers are penalized to cover for the bad, then there is little incentive or reward for performance.
- Managers multi-tasking to the point of distraction as there are too many things to do and not enough time. Things get sloppy, commitments crumble; plans become short works of fiction. The result is a culture of cynicism as leadership words are unlikely to be backed by the resources required to create results.
Steering via the gas tank is less of a signs corporate sloth or small thinking, but more like a signal. A signal that an administrative tool – in this case the budget – has outgrown its purpose, taken on a role for which it was never intended.
Gas tanks contain a reserve of fuel for the engine, nothing more. They are not the steering wheel, nor the road map, nor the windscreen through which we see the world.
Likewise, the budget is not a strategy, it is not a means of leadership, and it is simply an allocation of resources that should support rather than set the direction of where we need to go.