CXO

Before wielding the budget scalpel, diagnose the company culture

Budget cuts can bring out the worst in your organization. The CEO demands that a pet IT project cannot be dropped while employees refuse to let go of the cappuccino machine. Bob Artner explains strategies you can use to decide what to cut.


Before surgeons make an incision, they check the patient’s vital signs.

In my column last week, I raised the issue of the current economic uncertainty and how it was likely to affect your organization’s IT budget. At the very least, I argued that most IT managers were likely to face a reduction in the rate of budget growth, if not an actual decline. I pointed out some of the difficulties this was likely to cause. In this column, I’ll explain the role that a company’s culture plays in determining how to approach budget cuts.

Why corporate culture matters when trimming IT budgets
At this point, you might be looking at your monitor skeptically, wondering what the heck company culture has to do with budget cuts. Okay, you say, I can’t get rid of the cappuccino machine in the kitchen if everyone’s so attached to it, but so what?

The truth is, too many technical managers approach budget issues the way a network administrator troubleshoots an outage. That is, they know that something is wrong, and if they correct it, the problem will go away.

In fact, however, there often isn’t a single right way to adjust a budget. The circumstances of every organization are different, and what works for one won’t work for another. In fact, a strategy that worked for your organization last year might not work for you this year.

In a future column, we’ll talk about how you can better align your group’s spending priorities with the organization’s short-term and long-term goals. Right now, I want to concentrate on how your organization makes decisions.

How they decide, and how you cut
This is what I meant by company culture—not whether you have company foosball tournaments, but how you make decisions: how you set priorities and allocate resources. To make my point, I’ll describe several possible organizational decision-making strategies and illustrate the challenges they pose when it comes to trimming your IT budget.

Gamesmanship
In this kind of decision-making culture, managers spend most of their time trying to manipulate the budget and accounting processes, rather than concentrating on the actual needs of the organization.

A classic example is any large government agency, such as the Department of Defense (DoD). If you’ve ever worked as an approved vendor for the DoD, you’ve probably participated in some of the frantic efforts made to spend allocated resources by the end of the year. In that kind of environment, if you don’t spend the funds, you lose them next year. When it comes to cuts, everyone faces the same percentage. Of course, that provides you little incentive to be proactive about cutting your own budget.

After all, if the solution is that every department, regardless of need and budget size, is going to face the same percentage cut, why would any IT manager make his or her own cuts if the same across-the-board cut is going to come down on top of their existing cuts?



Inertia
At some organizations, when things get started, it’s just too difficult to stop them, or even to reexamine the conditions that caused them in the first place. Like that interminable lawsuit in Dickens’ Bleak House, these projects keep oozing forward, even after the person who gave them the green light has moved on to another company.

You would think that IT would be immune to this sort of thing, as quickly as technology decisions have to be made and implemented, but sadly, it happens. For example, how many companies do you know that are still in the middle of upgrading their desktops from Windows 95 to Windows 98, even though Microsoft has released Windows 2000 Professional? (Of course, some companies may be contractually obligated to do this, but you get my point.)

Autocracy
In this kind of decision-making environment, the boss (whoever that is) has some pet projects that can’t be stopped, no matter how stupid. Trimming the IT budget becomes pretty straightforward: The boss’ projects get funding and resources, and everything else fights for the proverbial scraps of what’s left.

A culture of trust
To make wise decisions about IT budgets, what you need is a culture of trust: an environment where people can candidly assess the value and worthiness of each project without fear of retribution. There are no sacred cows and no questions that can’t be asked. Everyone leaves their ego behind and tries to decide what’s best for the organization.

In such a corporate culture, you can also be proactive about cutting your budget in advance without having to fear that you’ve simply lowered your baseline for the “official” cuts that come later. In other words, your good deed will go unpunished.

Of course, most IT organizations are mixtures of these different kinds of decision-making. For example, even the most trusting culture might have a sacred cow or two meandering through the development project list. However, by recognizing what kind of decision-making culture you have, you will understand your options. More importantly, perhaps this kind of examination will motivate you to create a culture of trust in your organization.

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