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Budgets that Damage - The Downsides of Making the Numbers

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In my organisational career, I had budgets from the age of 22 to 47. I lived and breathed them and many times, budgets, the gospel that they were, caused havoc, albeit within the corporate retailer framework that I worked.

Here are two examples of the damage caused.

Example One

Typically budgets were initially discussed in January, just after the Christmas rush. They were always dependent on year-on-year sales growth and at the time in question, individual businesses were not expected to deliver 'profits', as the way the business was structured was not capable of sustaining that level of information.

So the budget got signed off about May (for the fiscal year staring the April a month before!). Monthly sales budgets were built, usually to a corporate model, as were cost budgets, the biggest of all being salary costs. Half year budgets had to be met and so by the time September's costs were in, you were well into planning your Christmas.

One year, after a review of performance of the organisation as a whole at the half year, a decision was made to radically trim salary budgets for the rest of the year. Out of 20 businesses in my geographical region, 8 were told to cut costs dramatically from November onwards. Because of the way that employment legislation works in the UK, you can't just lay people off. So we had to find a better way to cut costs, just before Christmas (and at that time, the only two months the organisation made any profits to speak of were in November and December!)

It was decided to reduce the hours of every member of my staff (some 125 people) by 9.9% (apart, much to my personal disagreement, from the management team, who would be under 'much greater pressure', so would maintain their hours (and salary)). Although I say it myself, I had a great relationship with my team, and everyone made matters much easier by complying with the 'request' within days (instead of the statutory notice-period, which for some could have been up to 12 weeks). My people were rock solid in how they put themselves forward and I was humbled.

But my Christmas business was badly damaged. The most profitable time of the year was damaged, badly and when the sums were added up, we lost 'profit', as far as I could calculate. The organisation's reputation was in tatters - and for what. Driving to achieve the budget, and more importantly keeping a lid on costs!

Example Two

My second example is the same organisation, bang up-to-date. Like right now, December 2004.

A manager is promoted in July 2004, to a very difficult store to manage - rather beyond his capability really. He inherits a budget cost overspend and is told to recover it by the end of the fiscal year (March 2005). He decides to cut back drastically on anything he can cut his staff costs on. So he 'cancels' Christmas recruitment and plans no extras for the busiest period of the year. Admitted, not the only period they now make a profit on, but still very, very important to their profitability, for the year.

Things go badly wrong:-

• Systems fall apart.
  
• Preparation of merchandise for Christmas is too late.
  
• Staff morale plummets.
  
• People leave.
  
• Absense levels rise.
  
• He becomes depressed.
  
• He makes some serious lapses of judgement, because of the pressure.
  
• He is disciplined and demoted.
  
• Another manager (the fourth in five years) is brought in.
  
• There is a severe underperformance in sales (est. £50-100,000 for the period)
  
• The manager's confidence is ruined, forever.

All to meet the budget...

He's not a bad guy, in fact he has worked his socks off. With support and guidance he could have made this work and then progress his career. He was given none of these, except told that he had to make the budget. The article goes on to say that rather than performing to a pre-written script, managers are far better when they work towards forecasting more and more accurately on a rolling (and, over time, learning) basis. Performance and results become a lot more honest, realistic and outwardly (i.e. customer) focused, rather than inwardly (i.e. how to avoid or 'cheat' the budgeting system).

Perfect solution?

Maybe. It's just the nagging fear I have that the organisation anonymously mentioned in the article, with the solution above, might be the one I've been talking about in my examples...

Sustainability is the hottest topic and it’s a pleasure to publish this blog from guest writer, Mark McCullough, marketing manager at Lexmark Canada.

Sustainability is a big buzz-word in today’s business world but what does it mean from an IT perspective? It goes without saying that engineering a “green� corporate environment must involve the entire organization, however, there are numerous ways the IT team can implement sustainable practices.

Monitor your Output

Establishing a responsible approach to printing is one of the easiest ways to make a significant reduction to your office’s carbon footprint. Think about how often a user prints a multi-page article when he only needs the information contained on a single page, or the amount of documents printed in error, or how many printed pages are often abandoned at a workstation. Most enterprise printing devices today contain several easy to use solutions that help foster a more intelligent approach to printing. For example, features like “Proof then Print� require users to preview the document prior to initiating the print feature, reducing waste resulting from unwanted pages. In addition to the obvious sustainability benefit of examining your printing processes, there is also a significant financial advantage realized when you encourage more responsible printing.

Recycle, Recycle, Recycle

It’s relatively easy to recycle the paper waste your office generates. The same principles should be applied to other functions in the office. For example, what do you do with old computers, faxes and printers once they’ve been replaced with newer models? Many manufacturers offer free “end-of-life� recycling solutions where your old equipment will be collected, brought to a dedicated recycling facility and, in most cases, turned into a new product in some capacity. This is also true of the materials in your office technology—for example, toner, ink, fax ribbons, computer chips. The more you can incorporate recycling throughout your technology environment, the more you will do your part to lower your organization’s carbon footprint.

Consider the Cloud

One way to reduce the amount of electricity your company consumes is to move some of your data off-premise and to the cloud. With fewer servers on-site, you can cut down on your electricity bill—in some cases, significantly. According to a recent study conducted by Pike Research (Link to: http://www.pikeresearch.com/newsroom/cloud-computing-could-cut-data-center-energy-consumption-by-nearly-one-third-by-2020?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+PikeResearchNewsroom+%28Pike+Research+%C2%BB+Newsroom%29), data center power consumption will decrease 31 percent between 2010 and 2020 as a result of the cloud computing model.

More Mobility

It’s an investment up front, but arming employees with technology to make them more mobile can also reduce your consumption overhead. For example, giving employees laptops to replace their desktops enables them to be just as productive from home as they would be at the office. With more mobile technology, when workers need to work late to complete a project they tend to leave the office at a normal time and pick the job back up at home. This allows companies to cut costs associated with keeping electricity and heat/AC running late, which is an unexpected green benefit.

Police your Policies

A lot of organizations have set policies governing technology use but IT managers aren’t always good about enforcing them. To foster sustainability within your organization, make sure employees are adhering to these by sending frequent reminders asking them to turn their computers off at night, make sure printers, faxes and other devices are set to power-saving mode and that desk lamps and all other technologies at individual workstations are turned off at the end of the day.

Sustainability is increasingly becoming an area of focus across the organization. By taking steps to ensure your IT practices include as many “green� components as possible, you can help your company achieve its larger corporate sustainability goals.

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