SparkPilot blog

Budgeting………… over the years, I have seen budgeting become this massive effort instead of it being the simple step of applying financial quantification to an annual execution plan.  So let’s go and look at the various opportunities for simplifying the process.

Opportunity I

Please do not merge the annual planning with budgeting process.  People, they are separate efforts.  Annual planning should be done after the strategic multi-year planning process.  Then the annual plan should be used as input to the budgeting exercise where the financial constraints are applied to the annual goals.  The trade-offs are then made based on the strategic goals.

When the financial planning is merged with the annual planning, people tend to become overwhelmed and/or decisions tend to be boil down to cost management instead of annual execution of the strategic plan.

And, let’s face it, the accountants already control too much of our life already.  Please don’t allow them to dictate how we do our jobs.

Opportunity II

This is one that I have seen happen more times than I can count and is a pet peeve of the budgeting effort.  When creating the budget, it is good practice to use the expenditure numbers from the previous years.  You do have that data don’t you?  So let’s look at this scenario.

We outsourced some work to a company and when we started, they only need to provide us with 10 folks.  If we assume that they charged us $20 per head per month, it would be a total cost $200 per month.  Then after five months we doubled the headcount to 20 folks, we would now be paying them a total of $400 per month.

So for the visual folks, here is what our expenditure looks like.

OK, so this is exactly like we thought it would be, a step up as we spent the money.  The numbers are in the table below, totally up to $1,000.

Now assuming that we would want to continue the service, how much should we budget for?

Well the simple answer is, that spent $1000 this year and therefore the budget should be the same because we have a flat budget.  Then there are other that are asking about the duration of the project etc.  So here are some more assumptions that for the purpose of this scenario, I will define but as management, you really should be making these bets.

• We will continue with the contract because they are delivering.
• There will be growth; you need to decide how you want to forecast it…….
• Assume no attrition

Of all of these questions, the biggest challenge will be how aggressive do we want to be be on the growth and how do we want to allocate it.  For the purpose of this example, I am going with 100% growth allocated across the four quarters.  This means that we will grow 25% of this years allocation every quarter.  Now the graph looks like this.

Again, no big surprises because it simply shows the continued expenditure and also the 25% growth every quarter.  Please note that they add up to $3,900 and therefore this will need to be the budget for the following year.  If you are being held to a flat budget, then you will need to prioritize and decide where to cut, this contract or elsewhere.

Opportunity III

Doing the budgeting exercise without supplier or partner involvement.  In this scenario, the person doing the budget takes a guess, or maybe looks at a couple of websites to get an idea of the possible costs.  In many cases this is done because the person doing the budget does not know what the actual annual plan is and the idea is to get enough $ before embarking on the project.

Some other reasons why the budget can increase:

• Off shore exchange rate
• Up-leveling of the skills of the out sourced staff
• Increased scope
• increased coverage
• Increased rates

In my experience, I have yet to have a supplier or partner account manager push back when I tell them I am working on budgets and need to understand what to budget for the following year.  Naturally I give them a month or two notice so that they can get things sorted out on their side.  This is especially key when dealing with off shore facilities because of the exchange rate fluctuations.

I was raised in South Africa and as such I got to experience the apartheid era.  I saw firsthand what affect discrimination and censorship had on the population and as a result I support the concept that everyone has the right to make their own decisions, even if those decisions will have a negative impact on themselves.  Censorship is one of the first freedoms removed when a dictator comes into power, is that where the USA is going??  Let’s not just hope, but also take a stance and influence.  Here are some words of wisdom from Edmund Burke

All that is required for evil to prevail is for good men to do nothing.

This blog contains original content and therefore theoretically be supporting the fight against piracy and copyright infringement; which I do!  However imbedded in this law is the requirement for ISP’s to inspect traffic and block what they deem to be content that is infringing.  I’m sorry but I do not believe that they are qualified to make that decision and therefore I am speaking up.

Google is fighting this and you can sign their petition here

Here are some news and articles with more information so that you can make your own decision on this topic:

BBC – http://www.bbc.co.uk/news/technology-16612628

CNET – http://news.cnet.com/8301-31921_3-57329001-281/how-sopa-would-affect-you-faq/

CNN Money – http://money.cnn.com/2012/01/17/technology/sopa_explained/index.htm

A while back, I was asking a friend for guidance and she said something a not being a mind reader and therefore I needed to speak my mind.  We laughed, stayed on topic and I communicated clearer so that she was able to understand me.  I started thinking about this and noticed that when I don’t know what to do or have a difficult problem to solve, I get quiet and think.  This generally takes time……….and while I am processing away, what message are others around me receiving?  Or in the instance of when we are tying to communicate something, we assume that people are getting the message that we intended.

I brought this up at our cohort meetings and we have discussed this in detail.  We all agreed that for clear communication to happen, you need the following address the following areas:

Someone must talk

Despite the many technology aids that we have, face-to-face verbal communication still remains the most effective method of communication and therefore someone needs to talk.

The reason behind the face-to-face communication and not TXT’ing, email, telephone is that these communication mechanism are all single mechanisms.  Face-to-face is the only mechanism that provides us with the ability to get at least three communication mechanisms.  The key ones are verbal, non verbal such as eye contact, expressions and gestures, and environmental situation (noisy room).

However, if it is not possible for face-to-face dialogue, then it is far better to use a single faceted communication mechanism such as TXT’ing, phone, and / or email.

Someone must listen

Not listening is biggest challenge with communication because we are so focused on getting our message across that we miss what the other person is trying to communicate to us.  If you catch yourself formulating your response to what the person is saying, then you are not listening to them.  Make sure that you understand what they are attempting to communicate, so ask clarifying questions.  Depending on culture, paraphrasing what you understood them to say back to them.

The most important element of listening is to shut up!

Timing

Is the person ready to receive the message that you are attempting to communicate?  This is a big one that is often overlooked.  If you are not sure, just ask them.  If you upset someone and even if you are ready and willing to apologize, are they ready for the message?

Is doing nothing the default option?

For those that are disagreeing with me right now and think that doing nothing is the acceptable default option.  (Pacific Northwest and the Passive Aggressive Communication style)  I would ask you to think about the following:

• What message is being received when you do not communicate one?  Are there others that are communicating on your behalf?  If so, are they communicating your message or theirs?  In my experience, they will communicate a message that is beneficial to them and not to you.  Only you can communicate the nuances of your message.
• If you do not know what you want to communicate, it is OK to acknowledge that and communicate that.  Acknowledging and communicating your perspective will form the basis on which you communicate on.