The Enlightened Company & Fiscal Responsibility (con.)

By Brad Fregger

I went out and walked around the store. Sure enough, there he was watching this guy paint the building.

"Joe, what are you doing out here watching your building being painted?"

"I'm not," he responded.

"What do you mean?" I asked.

"It's simple, I'm not watching my building being painted."

"If you're not watching your building being painted, what are you doing?"

"I'm watching some file cabinets being delivered."

Frankly, I was confused.

He could see that on my face, so he said, "I didn't have any money in the budget to get the building painted, but I did have a lot for new file cabinets. I didn't need the file cabinets, but I sure needed the building painted they wouldn't let me paint the building so I told them I was buying file cabinets."

Joe was forced to lie, to manipulate the system in order to accomplish what was needed. When you stop to think about it this is the ultimate in loyalty, a leader who knows what's right and will strive for it regardless of the consequences. If Joe had gotten caught he could have been fired, but it wouldn't have been his fault. It was the fault of an inflexible system that fostered unreasonable attitudes in the Sears' financial organization, an organization that should be serving the stores, not hampering their efforts to succeed.

1) It encourages the spending of money on unneeded materials and resources.

The opposite situation can be found at year's end, when you find managers scurrying around trying to spend up to their budget limits, because they know if they don't, they won't have the budget next year. This type of attitude, again fostered by an unworkable system, is unacceptable.

2) It moves control and authority up in the organization, while moving responsibility down.

In my opinion, when thinking about how leadership is effected by the current process, this is the worst effect of all. Leaders, to be effective, must have authority in line with their responsibility, must be able to make the decisions needed to get the task accomplished. Anything that takes away reasonable authority, is wrong, even stronger, is a sin within the context of the organization.

I can hear you asking, "So, I'm convinced the cure seems to be worse than the disease, what's the alternative?"

Some very successful companies get along fine without a budgeting process that involves every manager in the organization. When I was at Mervyn's, before they were purchased by Dayton Hudson, we didn't have a budgeting process. I'm sure top management put some kind of figures together for the investors, but middle management was never involved.

We did what we had to do to get the job done and nothing more. Probably, if I had gone overboard, I would have been asked to be more carefulbut the culture in the company included an attitude of being fiscally conservative. I had bought into it, nobody had to tell me to be careful and only spend what I needed to. This is where effective fiscal responsibility begins, at the heart and soul of the company, in the culture; in the attitude that you only spend what is needed, for what will pay back a benefit equal to or greater than the cost. This attitude is one of responsibility and trust, not control and manipulation.

Let me state this very clearly: Enlightened Companies will be, by nature, fiscally conservative, this attitude needs to be an essential part of the corporate culture, of the company's mission statement.

I believe this argument is compelling, but I'm not ignorant enough to suggest that we toss out the current process without replacing it with something more acceptable. Our current business environment is much too dependent on the investment community, and there is no chance that they will let the companies they have invested in get away without an acceptable budgeting process. If they're smart, they'll demand one that accomplishes what it can, without the tremendous loss of time, resources and money we currently experiencing.

The best alternative I have heard was offered by one of my MBA students at Saint Edwards University, Sheryl Mackey, she said, "We didn't use budgets when I worked as an accountant with Nippon Broadcasting News out of New York City."

Nippon Broadcasting is one of the largest broadcasting networks in the world and the major network in the Japanese market.

"You didn't. Why not?" I asked.

"The decision was made that the news was too unpredictable, and that budgets were therefore worthless. Worse than that, it was felt they would get in the way of getting the news."


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