A major pet peeve and gross sign of silos
There is one thing that people just absolutely need to give up. And that is thinking of how ideas or opportunities or issues will affect their budgets.
I'm not saying don't think about finances at all. Far from it. But as a senior member of staff, it is too common to think of budgets under your control first. "Will it make my department's bottom line better or worse?" I've seen people whose judgment I value a lot fall into this trap. If we are to truly move our organizations forward, this hard evidence of the silo mentality must be cast aside. When assessing anything — idea, problem, anything — use your mission first. A close second consideration is financial, but the only financial assessment that matters is the impact on the organization's overall bottom line.
Many times I've seen and heard of good ideas being beaten down, because the expense may come out of one side of the budget and any expected revenue comes out of another. When I've experienced these conversations, I've always thought they were so petty. But I've come to see them for what they really are: highly destructive to the health of the organization.
And CEOs—you're not off this hook. True, I'd hope that any CEO would look at the organization bottom line rather than how individual programs are affected. But if your senior people are going to overlook the affects on their budgets, your culture and practice must be that senior management is not held accountable for the financial performance of individual programs. Instead, senior management should be held accountable for the whole organization's bottom line. It seems to me that's the only way to have a healthy, functioning senior team.
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Comments
Scott, I have been watching and hoping for responses to your good (and provocative) posting. I think you've rightly challenged all of us for a "balanced" approach to individual and organizational peformance that goes beyond net margin financial performance.
We should be clear however: I know of few people fired for lack of good or timely ideas. I know lots of people fired for negative financial performance. So managing to the bottom (net) line is an important performance metric. It's just not a sufficient metric--at least for nonprofits IMHO.
Putting tools and processes like the Balanced Scorecard aside, and focusing more broadly, it seems to me that where the revenues come from, and where the expenses occur are much less important than questions/asnwers like:
--Is what we are doing fully supporting and advancing our purpose and mission?
--Do we understand the major sources of our revenues, and the major subsidized activities the revenues make possible?
--Are we market focused, and consistently delivering new goods and services to meet the needs of our market(s)?
--How do we measure success, in addition to financial performance (we need consistenly successful financial performance--no margin no mission)?
Oh by the way, no one gets off the hook--not CEOs, senior staff, or volunteers. Everyone is a player, and everyone has a responsibility for successful pursuit of the organization's purpose and mission, whether it be subsidized activity or margin-producing activity. And everyone has a bottom line (net) to face.
Hope others will respond to your good thoughts. Many thanks.
Posted by: Virgil Carter | April 11, 2007 12:02 PM