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The Big Picture of Business – Planning and Budgeting in Downsized Times

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Getting the funds that you need from tight fisted management is an ongoing process. Cash outlays are justifiable either by dollars they bring in or dollars they stand to save for the organization. Cash outlays are always risks. Justify your risks in proportion to riskier ones they have previously funded. Validate your worth to the overall company operation.

Under the rules of supply chain dynamics, one must study your supplier relationships, formalize a plan of outsourcing and develop collaborations.

Methods of changing the way that you go for funds include:

  • Take money with you. Show returns or savings on previous appropriations.
  • Position your request as an investment, not a cost.
  • Sell management-clients on acquiring more returns on their investments, not just on making further investments.
  • Be visible when funds are flowing.
  • Reduce management’s risk in doing business with you.
  • Be a consistent producer of profit-improving outcomes, not just a spotty or hit-and-miss producer.

Corporate management has three alternatives for funding every department: (1) Must fund. (2) May or may not fund. (3) Will not fund. The three horsemen of funding are: (1) How much. (2) How soon. (3) How sure.

These are ways to advance your funding process:

  • Put money in management’s pockets.
  • Get to the front of the line for funding requests.
  • Acquire an upper-management mindset.
  • Condense the funding cycle.
  • Become top management’s partner in efficiency of operations.

Base Budgets on Value… Not on Cost

1. Readily measurable values:

  • Time and cost of product development-service delivery cycles.
  • Reject, rework and make-good rates.
  • Downtime rates and meantime between downtimes.
  • Meantime between billings and collections.
  • Product-service movement at business-to-business levels.
  • Product-service movement at retail levels.
  • Product-service movement in the aftermarket (resales, repeat business, referrals, followup engagements).

2. Values in terms of savings:

  • Time and motion savings.
  • Inventory costs.
  • Speed of order entry.

3. Values in terms of efficiencies:

  • Meantime between new product introductions.
  • Forecast accuracy, compared to actual results.
  • Speed, accuracy and efficiency of project fulfillment.
  • Productivity gained.
  • Continuous quality improvement within your own operation.

4. Values benefiting other aspects of the company operation:

  • Quality improved on behalf of the overall organization.
  • Creative new ideas generated.
  • Empowerment of employees and colleagues to do better jobs.
  • Information learned.
  • Applications of your work toward other departments’ objectives.
  • Satisfaction in your service elevated.
  • Voiced-written confidence, recognition, referrals, endorsements, etc.
  • Capabilities enhanced to work within the total organization.
  • Reflections upon the organization’s Big Picture.
  • Contributions toward the organization’s Big Picture (corporate vision).

7 Steps Toward Getting Your Budgets Accepted More Readily:

  1. Commitment toward strategic planning for your function-department-company.
  2. Know your values.
  3. Refine your values.
  4. Control your values.
  5. Add value via internal services.
  6. Take ownership of your values.
  7. Continue raising the bar on values.

7 Stages in Making a Case for Business Funding:

  1. Link to a strategic business objective.
  2. Diagnose a competitively disadvantaging problem or an unrealized opportunity for competitive advantage.
  3. Prescribe a more competitively advantaged outcome.
  4. Cost the benefits of the improved cash flows and diagram the improved work flows that contribute to them.
  5. Team the project.
  6. Maintain accountability and communications toward top management.
  7. Contribute to the organization’s Big Picture.

Reasons for Goal Setting:

  1. Human beings live to attract goals.
  2. Organizations get people caught in activity traps… unless managers periodically pull back and reassess in terms of goals.
  3. Managers lose sight of their employees’ goals. Employees work hard, rather than productively. Mutually agreed-upon goals are vital.
  4. People caught in activity traps shrink, rather than grow, as human beings. Hard work that produces failures yields apathy, inertia and loss of self-esteem. People become demeaned or diminished as human beings when their work proves meaningless. Realistic goals can curb this from happening.
  5. Failure can stem from either non-achievement of goals or never knowing what they were. The tragedy is both economic and humanistic. Unclear objectives produce more failures than incompetence, bad work, bad luck or misdirected work.
  6. When people know and have helped set their goals, their performance improves. The best motivator is knowing what is expected and analyzing one’s one performance relative to mutually agreed-upon criteria.
  7. Goal attainment leads to ethical behavior. The more that an organization is worth, the more worthy it becomes.
  8. Most management subsystems succeed or fail according to the clarity of goals of the overall organization.

How to Find Goals:

  1. Examine problems.
  2. Study the organization’s core business.
  3. Strengths, Weaknesses, Opportunities and Threats.
  4. Portfolio analysis.
  5. Cost containment.
  6. Human resources development.
  7. Motivation and Commitment.

Make Goal Setting a Reality:

  1. Start at the top.
  2. Adopt a policy of strategic planning.
  3. Strategic goals and objectives must filter downward throughout all the organization.
  4. Training is vital.
  5. Continual followup, refinement and new goal setting must ensue.
  6. Programs must be competent, effective and benchmarked.
  7. A corporate culture must foster all goal setting, policies, practices and procedures.

Priorities:

  1. Focus on important goals.
  2. Make goals realistic, simple and attainable.
  3. Reward risk takers.
  4. Recognize that trade-offs must be made.
  5. Goals release energy.
  6. Information leads to dissemination, leading to teaching-training, leading to insight, leading to understanding, leading to knowledge, leading to wisdom.
  7. View goals as long-term, rather than short-term.

Rules for Budgeting-Planning:

  1. Use indicators and indices wherever they can be used.
  2. Use common indicators where categories are similar, and use special indicators for special jobs.
  3. Let your people participate in devising the indicators.
  4. Make all indicators meaningful, and retest them periodically.
  5. Use past results as only one indicator for the future.
  6. Have a reason for setting all indicators in place.
  7. Indicators are not ends in themselves…only a means of getting where the organization needs to go.
  8. Indicators must promote action. Discard those that stifle action.

Developmental Discipline:

  1. Discipline at work is accepted, for the most part, voluntarily. If not voluntarily accepted, it is not legitimate.
  2. Discipline is a shaper of behavior, not a punishment.
  3. The past provides useful insights into behavior, but it is not the only criteria to be used.

Applying Developmental Discipline:

  1. Rules and regulations must be known by all employees.
  2. Disciplinary action should occur as close to the time of violation as possible.
  3. The accused person must be presented with the facts and the source of the facts.
  4. The specific rule that was broken must be stated.
  5. The reason for the rule being enacted should be stated.
  6. The accused person must be asked if he-she agrees with the facts, as stated. If the reply is affirmative, he-she should justify the behavior.
  7. Corrective action should be discussed in positive and pro-active terms.

Ways in Which Goals Improve Effectiveness:

  1. Defines effectiveness as the increase in value of people and their activities as resources.
  2. Recognizes that humans are achievement and success creatures.
  3. Goals infuse meaning into work and work into other aspects of life. Life is fully lived when it has meaning.
  4. One cannot succeed without definitions of success. One must expect something to achieve success.
  5. Failure is inevitable and is the best learning curve for success.
  6. One’s goals start from within, not from work situations. The goal-oriented person adapts to the work environments.
  7. Collaborations with other people create success. One cannot be successful alone or working in a vacuum.
  8. One is always dependent upon other people, and other people are dependent upon you.
  9. Commitments must be made to other people.
  10. One must view the future and change as affirmative, in order to succeed.
  11. Knowledge of results is a powerful force in growing and learning.
  12. Without goals, one cannot operate under self-control.
  13. Objectives under one’s own responsibility helps one to identify with the objectives of the larger organization of which he-she is a part. Sense of belonging is enhanced.
  14. Achieving goals which one set and to which one commits enhances a person’s sense of adequacy.
  15. People who set and are striving to achieve goals together have a sense of belonging, a major motivator for humanity.
  16. Because standards are spelled out, one knows what is expected. The main reason why people do not perform is that they do not know what is expected of them.
  17. Through goal setting and achievement, one becomes actualized.
  18. Goal setting creates a power of one’s life…especially the part that relates to work.
  19. With goals, one can be a winner. Without goals, one never really succeeds…he-she merely averts-survives the latest crisis.

About the Author

Hank Moore has advised 5,000+ client organizations worldwide (including 100 of the Fortune 500, public sector agencies, small businesses and non-profit organizations). He has advised two U.S. Presidents and spoke at five Economic Summits. He guides companies through growth strategies, visioning, strategic planning, executive leadership development, Futurism and Big Picture issues which profoundly affect the business climate. He conducts company evaluations, creates the big ideas and anchors the enterprise to its next tier. The Business Tree™ is his trademarked approach to growing, strengthening and evolving business, while mastering change. To read Hank’s complete biography, click here.

StrategyDriven Editorial Perspective – Negotiations and the Divided Government

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A Republican controlled House of Representatives, a Democrat controlled Senate and White House – a divided government. And if to make matters more complicated, the Republican Party itself is dominated by two very different groups; the first and larger being the Traditional Republicans and the second being the fiscally conservative Tea Party Republicans. Could ‘getting to yes’ be any more difficult?

The recent debt ceiling debate illustrated the vastly different philosophies of these three dominant groups within our government and revealed to us a fundamental negotiation rule – one that we often forget, one that we should be much more diligent in recognizing when negotiating ourselves. This rule: identify the other party’s best alternative to a negotiated agreement.

Let’s consider the recent debt ceiling debate…

Common among all three parties was the desire to prevent the United States government from defaulting on its debt obligations. This particular desire was clearly a moot point. The Federal Government takes in approximately $200 billion per month, an amount far greater than that needed to service its debt. The only reason a default might have occurred would have been that the President and Treasury Secretary would have chose to pay out on the government’s other monthly expenditures ahead of the debt service. This was believed to be highly unlikely. Thus, none of the three parties needed to be truly concerned about a debt default.

The second objective of all three parties was the avoidance of a credit rating downgrade. This particular outcome was a real possibility and in hindsight actually occurred. At the time (prior to the actual downgrade), the threat of a credit downgrade forced all three parties to the negotiating table. However, how to deal with the threat of a downgrade was represented a vastly different position taken by all three groups. More to come on this point in a moment…

The third common outcome desired by all the parties was for the United States Government to meet its financial obligations to military service members, veterans, and the elderly by way of making compensation, benefits, and social security payments. Once again, the United States Government receives enough monthly tax revenues to meet these and its debt service obligations making this another moot point.

The fourth belief shared by the three parties is that an expanding economy is the ultimate solution for increasing government tax revenues and more closely balancing the government’s income with its expenditures. How to achieve this economic growth is the key difference between the parties and forms the basis of the debt ceiling negotiations.

Let’s now examine those differences…

The Democrats: The Democrat Party, in general, believes that government intervention is required to grow the economy, to create jobs. Their focus is on job creation through the building of new and refurbishment of existing infrastructures. Furthermore, Democrats believe that by providing funds to the less fortunate, that these individuals will more greatly participate in the marketplace which in-turn will foster greater economic activity and growth. Democrats feel that given the depressed economy, those millionaires and billionaires – defined as individuals earning wages more than $200,000 or married couples earning more than $250,000 per year – should pay more in taxes to enable their prescribed government spending. This increase in tax revenue derived from this group would be achieved through the elimination of existing tax deductions and an increase in these individuals’ tax rate. Lastly, Democrats wish to heighten marketplace regulation to ‘protect’ their defined middle and low income wage earners.

The Republicans: The Republican Party, likewise, want to grow the economy. However, they believe that taxation and marketplace regulation should be reduced in order to lower the burdens and risks presented to business owners that will, in theory, spark increased economic activity and growth. Furthermore, Republicans believe in lower individual taxes as a mechanism for enabling citizens to retain more of their income which would then be spent within the marketplace and bolster economic activity. They believe that this reduction in government tax revenues should be offset by some modest reductions in Federally funded programs and the restructuring of others. Republicans are not calling for an immediate balancing of the Federal Government’s budget but rather believe their deficit spending will eventually be offset by the increased revenues received from a growing economy some number of years in the future.

The Tea Party: The Tea Party, in principle, shares economic philosophy of the Republicans. The difference, however, is that Tea Party members believe that the government should live within its means now, not many years into the future. Subsequently, the Tea Party wants to cut government spending, primarily through institutional downsizing, to a far greater extent than Traditional Republicans. They believe economic growth is best achieved through a balanced government budget in the immediate-term, not with the promise of a balanced budget some years out.

Considering the desired results of the three parties negotiating over the debt ceiling increase, we can see that there is, in fact, a lot these groups have in common. The negotiations, therefore, center on the approach to achieving these goals.

Now, let’s examine the best alternative to a negotiated settlement. If the parties did not come together on a compromise position that would garner enough votes to pass in both the House and the Senate as well as receiving the President’s signature, the Federal Government would hit its debt ceiling and have its spending limited to that equal to its monthly tax revenues. This would force the government to prioritize its spending and essentially achieve a balanced budget. Additionally, we find that the government could cover all of the commonly desired program funding, namely the service of debt, payment of military salaries, provision of veterans’ benefits, and issuing of Social Security checks. Therefore, all of the commonly desired could be met leaving only the approach to be negotiated.

Considering the desired approach of the three negotiating parties, we find that the Tea Party’s demands in this area would have also been satisfied with Traditional Republicans being partially satisfied and Democrats receiving none of what they desired. Thus, the best alternative to a negotiated solution met the Tea Party members’ demands enabling them to firmly resist any solution not in line with their wishes. This made the Tea Party the most powerful, if not the smallest in number, negotiator at the table. Likewise, Traditional Republicans, the second smallest group, was in a more powerful position than the Democrats who held the greatest control over the Federal Government.

StrategyDriven Recommended Practices

This best alternative to a negotiated solution example highlights the power held by each party and helps explain why the negotiations ended as they did… with no tax increases and an equal value in budget cuts to the amount of debt ceiling increase. It also illustrates several practices StrategyDriven leaders should take when negotiating with other parties:

  1. Define your best alternative to a negotiated solution and its acceptance to your organization.
  2. Identify the best alternative to a negotiated solution of those you are negotiating with including the acceptance of that solution to their organization.
  3. Outside of the negotiations, work to improve your best alternative to a negotiated solution.
  4. Outside of the negotiations, identify those factors that may worsen your counterpart’s best alternative to a negotiated solution and consider taking ethical action to worsen their position.
  5. Reasonably and aggressively negotiate with your counterparts while leveraging this best alternative to a negotiated solution information.

Additional Information

For additional information on determining the best alternative to a negotiated solution and other negotiation best practices, StrategyDriven Contributors recommend Getting to Yes: Negotiating Agreement Without Giving In by Roger Fisher, William L. Ury, and Bruce Patton.

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Unleashing Genius: Is Wisdom Your First Priority?

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Imagine a world, company or life committed to nourishing every glimmer of wisdom from the cradle to the grave. How would a world whose first priority was seeking and manifesting wisdom feel? Can you see how wisdom would flourish into genius with waves of innovations that naturally lead to abundance and wealth beyond our imagination today?

Wisdom Has Created Wealth and Well-Being Worldwide

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About the Author

Paul David Walker, CEO of Genius Stone Partners, was part of the first to create a leadership firm designed to align strategy, structure and culture to fortify some of the largest companies in the United States including Star-Kist Foods, Rockwell International, Conexant Systems, Chase, Anne Kline and New York Life. His own genius lies in integrating business strategy and philosophical insights, guiding the leadership of major companies with a holistic approach that allows them to grow grounded, stable and balanced – and ultimately, become much more successful leaders. Some of the most influential leaders in American business have relied on him for expert guidance since 1984. To read Paul David Walker’s complete biography, click here

Corporate Cultures – Culture-based Work Performance Model

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In, Culture’s Impact on How Work Gets Done, we described the profound influence an organization’s collective values have on the controls (individual knowledge and skills, standards and expectations, processes and procedures) and triggers (individual contributors, first line managers and supervisors, executives and senior managers) that determine what work is undertaken and the manner in which it is performed. Therefore, observations of an organization’s unique work controls and triggers preferences can be used to reveal many of the characteristics of its culture. And from these the benefits and risk factors an organization faces as a result of its culture.

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The Happiness Advantage: Researching Happiness at Hogwarts

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Excerpt from The Happiness Advantage…

For me, Harvard remains a magical place, even after twelve years. When I invite friends from Texas to visit, they claim that eating in the freshmen dining hall is like being at Hogwarts, Harry Potter’s fantastical school of magic. Add in the other beautiful buildings, the university’s abundant resources, and the seemingly endless opportunities it offers, and my friends often end up asking, “Shawn, why would you waste your time studying happiness at Harvard? Seriously, what does a Harvard student possibly have to be unhappy about?”

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About the Author

Shawn Achor, author of The Happiness Advantage: The Seven Principles of Positive Psychology That Fuel Success and Performance at Work, spent over a decade at Harvard University where he won numerous distinguished teaching awards for his work. He graduated magna cum laude from Harvard and earned a Masters from Harvard Divinity School in Christian and Buddhist ethics. In 2006, he was Head Teaching Fellow for ‘Positive Psychology,’ the most popular course at Harvard at the time. In 2007, Shawn founded Good Think Inc. to share his research with a wider population. When the global economy collapsed in 2008, Shawn was immediately called in as an expert by the world’s largest banks to help restart forward progress. Subsequently, Shawn has spoken in 45 countries to a wide variety of audiences: bankers on Wall Street, students in Dubai, CEOs in Zimbabwe. Shawn’s research on happiness and human potential have received attention from the Harvard Business Review, New York Times, Forbes, CNN, and NPR. To read Shawn Anchor’s full biography, click here.