Race, Don't Chase

Another issue for management is her

Another issue for management is her employees are stressed over financial concerns and the prospect of corporate cuts back. Knowing employees are especially stressed means not adding to it with vague answers to questions about budgets, lay offs and the like. Tough road to walk, but since your reputation as an honest, caring manager is important, you know how to make the right decisions on what/how to say.

And generally the right answer is very

And generally the right answer is very little answer at all. Whether we like it or not, our first responsibility as a manager is to the company, and often layoffs and cutbacks are "close-hold" information, not to be shared openly.

Mark

During an economic down turn is the

During an economic down turn is the worst time to lower a budget. As managers it is more important to defend increasing your budget and not decreasing it for that very reason. Otherwise the affects of the downturn are compounded since there will more then likely be other organizations doing the same thing. Rather then following a mindset of doom an gloom, a podcast on increasing the availability of funds would be a lot more helpful to the economy as a whole and to the organization. After all, if you increase your spending to your vendors then you have the ability increase their spending to their vendors and the trickle effect can help remove a downturn. Likewise if you decrease the amount of spending your suppress your vendors, employees, whatever to spend money and increase the affect of the downturn. Even Drucker argued that profit is only a measure and not a goal of an organization. Hence short term pain by increasing spending can increase the possibility of a customer who is the most important focus a business must have, of becoming or maintaining their relationship as a customer. Revenue is always more important then costs. Sorry guys, you got this one wrong.

Dackfdst- Sorry we disagree.

Dackfdst-

Sorry we disagree. Managers aren't responsible for the economy, they're responsible for the company.

Thanks for sharing your point of view!

Mark

Dackfdst, Mark's right: as a

Dackfdst,

Mark's right: as a manager, your responsibility is to the things you can actually control.

The current crisis is largely one of solvency, not liquidity or demand. Fear of insolvency (of borrowers) has created a credit crisis. Solvency is achieved by being profitable and having a positive cash flow.

You can't spend money you don't have, in a credit crisis, even if you believe you'll help the economy.

John

It seems to me that we are overlooking

It seems to me that we are overlooking a alternative to managing in a downturn. That is increasing productivity with the same budget. Yes, it is a different scenario, but I would argue that a manager that shows increased productivity (thus "revenue") per unit of cost is a better manager with better employee retention and is better poised to pounce when the economic landscape changes than the manager who has whittled costs, morale, and productivity during the downturn.

The manager must be able to communicate their plan for increased productivity to your stakeholders, so they can maintain the capital requirements of your company. Then the key is to consistently deliver using MT techniques.

A different way to think about managing in a downturn and I think consistent with Drucker and MT.

Ken

Ken- If only Drucker were our boss!

Ken-

If only Drucker were our boss! In theory yes, productivity gains ARE a form of profit, (future, unrealized)...but they don't get shown on monthly reporting.

Mark

I am a first level Manager (with 10+

I am a first level Manager (with 10+ directs) and my boss is a Director (with 3 other first level Managers and about 30 reporting employees.) Our public company was acquired by a private company about a year and a half ago. The combined company is now in the $1B+/yr category so we are just a small business unit in that big picture.

I've never been involved with the budget so I took your advice and asked. My boss told me "I am not currently privy to this information. The budget information is still going through a bit of transformation as a result of the acquisition, and breakdown of branch structure."

Thoughts? Thanks!

Long time listener and fan, BTW!

Poiu- Well, sounds like you're off

Poiu-

Well, sounds like you're off the hook. Not unusual for small companies to not allow lower level managers to manage their own budgets.

Mark

Taking into consideration the number of

Taking into consideration the number of days in the month, daylight savings, holidays and the like was a question I posed to the boss yesterday in considering Obama's plea to take election day off. I found your podcast fitting.

The problem with TV advertising... It

The problem with TV advertising...

It is too sexy! When you look at the output on your television they are annoying and intrusive. To a marketing manager, or an executive though, the process of creating the ad is like living a little slice of Hollywood......

Enjoyed the cast today whilst driving

Enjoyed the cast today whilst driving back from working on an interstate client. I particularly appreciated you comment about the quarterly focus and how that can distort management planning. I also wonder about some of the KPIs the Wall St genius focus on that drive strange behavious in some companies (eg revenue per employee not recognising the significant difference in cost of employees around the globe!).

One of my best stories about quarterly focus (or disfocus) related to a client of mine where I implemented an electronic procurement system and staying on for other consulting was asked to be the business subject matter expert to support the help desk on difficult issues or matters that needed some business decision. I hated the end of quarter as the company had a use it or loose it mentality so at the end of the quarter the marketing staff would be raising all sorts of purchase orders for their business partners (and having not managed their expenditure during the quarter forgot how to use the systems) and we would have massive errors or approval issues as all the execs were in end of quarter meetings and not able to approve all the PO's. The orders were then parked with the suppliers and then drawn down in subsequent quarters, all in all a very artificial process and make alls sorts of challenges for effective financial governance.

Mike/Mark: A GREAT and timely topic.

Mike/Mark: A GREAT and timely topic. Thank you! Your advice crosses multiple levels of management and therefore makes this cast relevant to a broad audience. I'm looking forward to the second part.

-Hugh

JP- Yep, all those things happen.

JP-

Yep, all those things happen. Frustrating....

It's too easy, it seems, for management to begin to focus on proxies rather than the business.

We appreciate the comments, and it's a privilege to serve you.

Mark

Mark and Mike, I like the concise

Mark and Mike,
I like the concise phrasing of “Race don’t chase”. A college dean I used to work for called it “4th Quarter Parity”. His idea was to always under-spend your projected budgets in the first three quarters because there is plenty of time in the 4th Quarter for spending and allocations to achieve parity. Obviously, spending should be done to accomplish things. We need to spend to get things done. But, I like your phrasing. Prudence early in the budget cycle avoids having to make painful decision later. I like avoiding pain.

Ed

Ed- I'm familiar with 4QP, and RDC

Ed-

I'm familiar with 4QP, and RDC is NOT that....

Thanks for your comment!

Mark

Mark, Yes, the distinction, as I

Mark,
Yes, the distinction, as I understand it, with RDC is that as a manager I am attempting to anticipate the next month's revenue either based on my manager's directions or directly interpreting the economy by knowing the business.

In about a 1/3 of the annual government budgets I have worked under in the last 20 years, we have had one-time budget reductions during the fiscal year based on changes in tax projections (Corporate grants have been similar). Often the signs of tax revenue changes are obvious months in advance of the reduction. If I understand your point, start the spending reduction in anticipation of the actual revenue reductions.

In government, our revenue reductions tend to be discrete and retroactive without advanced management notice (e.g. A 5% reduction in total annual budget with 3 months left in the fiscal year). As a manger I try to smooth the curve ahead of the reduction. I expect at least a 2 to 3% reduction in my total budget this year. Congress has yet to pass a budget and won't likely until March (5 months into the fiscal year). The reduction could be 6 or 7% from my total annual budget; I am spending now like it will be a 7% reduction to my total annual budget.

This is a great cast. I could use more on budget management. Keep it up.
Ed