It’s still budget season across corporate America and we’re getting to crunch time. In the first pass of the budget, you invariably include all your wishes for the coming year. What new initiatives you’d like to take, why, and what kind of revenue and/or cost savings they’ll generate.
The first pass is usually somewhat unconstrained, or constrained in a very limited way. The objective is to get you thinking about what you could do if you didn’t have to worry too much about the money and resources needed to accomplish those tasks. And that’s the right way to do the first pass at budgeting. You don’t want to shortcut creativity and encourage lateral thinking which, by definition, requires no constraints.
The second pass is where the trouble starts.
Once the finance guys roll up the first draft, the problems begin. The CapEx requests are 3X what the company can tolerate. There’s an insane new headcount request (this is guaranteed to be a problem, and is bigger the less-seasoned and mature the management team is), the product roadmap is literally unachievable due to space/time continuum issues. And so forth.
So finance steps in, under the guidance of executive management and begins imposing constraints. And that’s where the biblical levels of wailing and gnashing of teeth begins. And the never/always justification for the crying starts:
“The finance/accounting/CFO/planning guys never give me enough CapEx to achieve my objectives.” “This company always favors that other department and not mine.” “I’ll never recruit good talent without frozen superduper macchiato tofu machines at every workstation.”
Babies cry when constraints are applied. Leaders shrug and carry on.
What do babies do when constraints hit them in the face? They cry, they pout, they hit. If old enough to verbalize, they try to negotiate. “But Joe’s finance guy lets me buy my own servers outside the shared/secure corporate infrastructure, so I should be able to run my department on Lotus notes instead…” (Don’t laugh, I’ve heard something very similar to this multiple times.)
Leaders understand that constraints are good. Fewer resources and tighter definitions of what we need to accomplish simplify the problem and clarify the possible courses of action. They make you say “no” to more things. They give you a solid north star to follow.
And the best things have usually been built with very constrained resources. Consider the ingenuity applied to get Apollo 13 home using only the stuff they had on the LEM and CM and whatever thinking could be applied by the men on the ground and on the ship.
When constraints are applied, I go home early
When pass 2 of the budget starts, I always get home first. Why? I accept the fact that constraints are part of life and budgeting process and don’t waste my time with the political arguing and horse-trading to get resources. I treat the coming fiscal year challenges as a linear programming problem with a series of constraints. Once the full extent of the constraints are known, it’s relatively easy to figure out what my team can and can’t do.
The team appreciates the fact that we don’t hold out false hope of getting a different set of constraints or a reality that might be more suitable to us but is, in fact, a fantasy. Plus, they get to go home and recharge and refresh instead of cranking out extra PowerPoint slides.
Seth Godin covers this well here, as well.
Takeaway: Consider the constraints placed on you during the budgeting process as a gift. Lead and don’t be a baby. Go home early and get some rest so you can win.