I am forever learning and experiencing examples of how much impact budgets have on agile at scale. Whilst it is behavioural it is not something I attribute to individuals or a resistance to doing the right thing. It is a contraint that traditional thinking places on Managers in the way their success and performance in running their little part of the business is measured.
Somehow being ‘on budget’ is considered a key indicator of the success of a company. I can understand how this can be true in a literal sense i.e the company is spending within its means, but this is not the context we give managers, for them it is ‘do everything, but only spend this much’. The budgets also get smaller each year…so its do more with less until you can do everything with nothing….. a never ending spiral.
Additionally money is separated into different buckets of capex and opex further muddying the waters and decision making based on how much of each bucket we have. Who hasn’t heard the “can we make this an opex” conversation as capex budgets run low.
Just think of some recent examples of this at play:
- Bias priority decisions. Priority decisions being made based on what fits within a capital budget budget not what generates the greatest return.
- Spending budgets at the expense of delivering value. This is interesting, if a deliverable cant be capitalised then it may become opex. If you have no opex left then you may need to shave staff to accomodate the new opex. Best you continue with the low value stuff until it is capitalisable…. at least you have the budget for that.
- Bigger becomes better. Breaking work into smaller chunks comes with undeniable value such as improved flow, stopping when enough and generally more agility to respond to change. However budgets require big assumptive business cases to justify an allocation of funding sometimes over ,12 months in advance.
- Owning of resources. Opex budgets stipulate the people available to the team to complete the work. So if more valuable work exists elsewhere in the organisation its difficult to move people to get it done. In fact you are better served making all your people look busy … just in case you need them later on.
- Adapting to change becomes onerous and includes re-working business cases or re-submitting approvals. In many cases its just easier to finish what your doing and then go back later to make changes….in the next budget cycle.
- Visibility and truth are left to the gamers. Allocation of budget is a scarce resource so managers are forced to do what it takes to get their share of the pie. This means pumping up the importance and value of their projects, making them look as successful as possible, making everyone seem busy and at the end of the financial year doing what you have to to make it appear you made the numbers.
So whats the answer? Well it would just be easier if everyone felt valued, the highest valued work is what is done and people and money are available to support it. Managers and staff should rewarded for changing to meet demand, stopping work that is less valuable and providing accurate visibility so better decisions can be made.
Lets re-think the purpose of budgets, to make sure we spend responsibly and effectively in order to meet the purpose of the company, not for control and performance management. Start by implementing rolling wave planning (annual budgets done monthly), giving managers the guidelines under which expenditure makes sense and let them innovate to stay within these. Set up a portfolio office that simply measures your progress to meeting your purpose and looks at budgets through the lens of these guidelines (aka beyond budgeting style) and have a common view of what value looks like across all lines of business so you know what to work on and where to focus your people.