PerformanceCartography™ / LeanBudgets™

Applying "lean" principles to budgeting and performance measurement.

Category: Uncategorized

Best Sales Pitch – Make it Real.

I made a minor stab at this with the nursing floor labor – but it occurs to me that the best way to sell my cartography concept is to take the huge ugly binder of December / Q2 results and convert it to something that can be used by operations managers.  The comparison should be compelling.  The data aren’t set up for an easy translation, but I suppose I have nothing better to do this weekend.

Stay tuned for some before and after comparison.

Some cool content and references – eagereyes.org

I ran across some great resources on data visualization by Robert Kosara on his site eagereyes.org.  It seems to be one of the best compilations of the math, psychology, and empirical factors that I’ve seen.  He also seems to recognize some of the “art” in the intangible factors, although I’m not sure he’d put it quite that way.  He has ten years of steady content so it may take me quite a while to explore.

Fresh Energy

For a variety of reasons my efforts on LEAN Budgets has been stalled, even though some successes were happening.  We had a good presentation at the IMA conference in Denver in June – thanks Josh!

Now a personal career change might offer a fresh case study in how LEAN Budgets can impact an organization; documented before and after.  I’m also looking for some resources to partner on a rigorous academic evaluation of the methodology.

I’m still working on the mathematical modelling of probability regarding report interpretation, but it’s pretty obtuse material.  I feel like I’ve figured it out, but communicating it is a challenge.

Business Cartography

Business Cartography:

These two words came to me out of the blue, but struck me as the perfect description of what our output should look like.  Rather than spreadsheets, business performance needs to be rendered more intuitively as a map.

The business factors of Revenue, Labor, Expenses, and Quality factors can all be sized relative to their impact, and positioning relative to performance benchmarks.

The result is better holistic understanding at a glance without complicated interpretation.

Epiphany (Semantics): Beyond Budgeting?  No.  Look WITHIN.

I found an article in, of all places, the Pakistan Journal of Social Sciences that confirmed a notion I hadn’t yet internalized.  Authors Michael Goode and Ali Malik looked over the notion of “Beyond Budgeting” and confirmed most of the conventional budgeting problem, but were doubtful that the solution was captured completely in the Beyond Budgeting movement.

It prompts me to look at where Lean Budgeting falls, and I think I’m working well within budgeting, not beyond.  Rather than figuratively throwing the baby out with the bathwater, I advocate simply stripping the conventional budget process back for best value.  Don’t apply ratios to forecasted volume, then normalize results based upon volume; stop at the ratios and compare actual performance based on ratios.

Budget like a Vulcan

Faith is nice…. on Sunday….  in church…  for believers.

But we’re not doing budgets on Sunday  …in church  …as for managers as “believers”?  Yes, perhaps too often they’ve been drinking the corporate kool-aid.

I suppose I’m starting to sound pretty predictable, but all my experience leads me to one fundamental recommendation: don’t build your budget on wishful thinking.  Don’t let management team “group think” mess with your forecast, and resist the temptation to build in the “obvious” growth curve.  Even if you’re correct, growing volumes too often serve to hide growing inefficiencies.

Minimize the influence of the forecast, focus on efficiency improvements.

Budget well, and prosper….

Vulcans

Abandon all hope, ye who enter here…

Why have we abandoned the volume forecast?  Don’t we need to “plan” our resources?  How will I know how many new staff to hire?  Haven’t we invested a lot of resources in a forecast algorithm and departmental reviews?  Resistance to change is natural, but suddenly there seem to be quite a few stakeholders with a strong attachment to the forecast, most of whom never quite understood how the forecast was derived.

A key component of this model is a dramatically reduced emphasis on the volume basis by which the dollars are calculated.  We simply take recent averages and push them forward.

It comes down to this: What failure mode are you more comfortable with?  There will always be some degree to which the budget fails, so why would you introduce any appreciable forecast volume, an element guaranteed to be wrong?

How would you like the budget to influence your organization?  Let the budget drive the organization to profitable behaviors rather than having it serve as a crutch, documenting wishful thinking.  Any volume projection will invariably be wrong to some degree, but if profitable ratios can be maintained, or improved upon, the organization will thrive.

Additional volume at a profitable ratio will accelerate organizational margins.  Lackluster volume at profitable ratios holds the organization at profitability.  But a budget built on presumed volume often simply covers degrading ratio efficiencies.  I’ve seen far too many budgets stretched to meet a corporate goal not by incorporating improved performance assumptions, but simply by padding the volume.

Challenge your organization to increased profitability and efficiency, not wishful thinking and misguided optimism.

Business people

PerformanceCartography™ ©2016 ,LeanBudgets™ ©2015