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Beyond Budgeting

July 13, 2011

 

Yes I’ve been quiet.

I don’t have any excuses. I’ve lost my arguments after writing to a bunch of managers (regarding their availability):

Remember: time is equal for all humans. How you manage it is the only thing that keep us apart :)

But this is not the point today.

I’m here just to share some thoughts on Bjarte’s book.. a wonderful one I should say – thank you Olaf for suggesting  this one.

The book is very very interesting. And it’s all about common sense.  I would sum all the words and sentences I read as: We need to Humanize work. 

Leadership in a nutshell:

” We need more leadership and less management”

” People are Hungry for good leadership: direction, inspiration, and support.”

” Good Leaders should create: Clarity, capability, and commitment”

 

Nowadays managers  are requested to be different from what  Managers were 30, 40, 50, 100 years ago.

Most people that work,  have brains.  It’s true! A fact. Some scientists have studies that point out this  as a fact!!.  Workers have brains nowadays… and guess what: they are starting to use it.

So a problem arises:  Workers don’t need to be told how to do stuff. They just want to know what to do. And this is the role of a manager today: give directions, LEAD.

Everyone knows this…I mean.. people aren’t stupid (at least that much).. so why don’t we evolve? My PoV is that:

1- Schools and universities are part of the root : they still teach old fashioned X&Y theories (which is good from an Historical/”get the basis” point of view)  and show no Modern Leadership styles (is Management 3.0 part of the recommend books in universities? Beyond budgeting? Lean Prod Development? Maverick? ..).

Students leave college and all they know is how Henry Ford changed the world…in the 20th century. Do you think this young leaders will make a difference? I answer that: they will… but first they’ll need sometime to catch up what’s going on the real world..

My point is… newbies don’t have the chance to learn about this right there in school and then they get to the market and what they have is still those old-fashioned managers we are now trying to change, as a reference on how to do stuff…

2- People are afraid. Humans are not so brave. Specially when dealing with each other. We rather do things by ourselves than to rely on someone else. And in Trust inhabits our biggest challenge.

For those that only work with sayings :  If you want to travel fast- travel alone; If you want to travel far- travel together”.

About Trust

“Leadership must be built on and not against human nature” 

Stop controlling. Humans are not made to be controlled.. we are free thinkers. Get the best of this.

“Strategy seems to be preventive control on all people, rather than Damage control on some” 

This is about policies imposed to all just because some of us do not deserve trust. Of course some people will take advantage of the system..we are humans remember? But are they really the majority?  They aren’t.

 

“Transparency is the new control system” – This one is from Jeremy hope.

Bjarte says on this one: that’s why thieves operate at night :D …

Imagine if everyone in your company knows exactly what everyone else is doing, the costs, decisions.. imagine that everything is accessible and transparent for everyone .. what else do you need? I mean.. you ‘ll have , not a finantial department, or whomever, controlling the company but rather the company controlling itself! Each and every worker would be a controller because they would have access to everyone else’s costs and whatever.

“You(managers) do not have to do all the driving yourself. Lean back, trust the driver and lead instead!”

Bottom line: it’s easier to give boundaries than to set people free. But again: do you want the less/worst  or the most/ best of them?

If you think you are the only one to be trust. Think again: you have a problem.

Cost control

This is the one I’m reading now.

Start by understanding that costs should be (but aren’t) divided in Bad Costs (those you need to lower down cause they bring no value)  and Good costs (example: investment in a new product).

This is, from my PoV the first mistake companies do: no distinction whatsoever on costs. It’s all bad costs . And so company weakens it’s growth. No new products, no future dude. Plain and simple.

How do we control costs? We handle people small bags of money.. called budget. Each bag of money has the amount taht … how is that done really? Is it that someone from some other place in company (that knows nothing about my product, portfolio and people I work with)  looks at some historical data and fills out my bag with the money I will need for a year, knowing that I’m working a fast-paced business with fearless competitors and impatient customers? Oh boy… must be an awesome person with such an ability to predict the future.

Bjarte explains that whenever you give a budget to someone at least 3 bad things happen (I haven’t finish this chapter yet so new things will pop up):

1- You are deciding other people budgets and you are obviously not very smart.

Come on! you’re trying to predict the amount of money other people will spend and invest in  year? People who’s work sometimes you actually don’t get very well.. ok.. you have fancy tools to predict the future- let me guess: CristalBall2.3 Enterprise Edition.

Wouldn’t it be better to continuously get feedback from the system and decide on best investments?  Do you really think you can plan unpredictable, ever changing future using old fashioned historical records? (which, btw, are wrong and you know it – year after year your budget predictions fail and you still use the same method.. told you: you’re not very smart, and you are sick- you suffer from Control delusion )

2-  You give a budget bag to someone to spend ..

Try this: give your kids 100Euros and say-” This is yours, use it as you will.But If some is left at the end, I will keep it and next week I”ll give you less.”

That person will spend it all even if it’s not really needed, why? Because if that person does not spend all money someone will say that he/she doesn’t know how to invest properly– and he’s not doing a good job on growing his own area.

Or, the other scenario: that person will loose part of it’s budget next year- because budgets are done on historical analysis… and if you haven’t spend it all this year.. you certainly will be cut off next year.

3- Your predictions will obviously fail.. and you’ll have to inject some more money somewhere..  how will you do it? Reallocate bags?  Yes..do that if you want riots inside your company.. Thake money from some to give to others.

Your kids again:

“come here honey, give me 75 euros from the 100euros I gave you, because I want to give them to your brother has he has no more money to spend on his candies” … sure mummy…

Regarding Budgeting the big question in the book is by now:  do you want to Control costs or do you want to ensure an Efficient and valuable usage of all resources?

Think about it. Be smart . Business ain’t what it used to be.

 

Ps- know what’s the best of it? We’ll most probably be able to hear this from Bjarte at Ale2011

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From → Agile

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