How to use a bad process to destroy your company

I'm a persistent supporter of the technology founders who run their own companies, but the technology founders have been doing a lot of damage to their businesses by screwing up the budgeting process. Yes, budgeting. It's absurd. How did this happen? Why is this a particularly big problem for engineers?

First of all, I will use my own negative example. Our sales are growing so fast that the biggest problem we face is that we can't cope with so many customers who want to register for Loudcloud. In order to expand our capabilities and compete with the market, my team and I are trying to plan all the necessary activities. Next, I laid out my goals and activities for each of the functional leaders. Together with the leadership team, I set the lead and lag indicators for each goal, setting measurable goals that ensured the goal. Then I told the team to find out what they needed to do to achieve those goals and then return to the people and budget they needed. Finally, I adjusted these requirements to the industry benchmark, which is mostly cut, and made a plan that I thought would work.

The following are the basic processes:

1, set the goal that we can develop.

2, target decomposition, clarify the specific team in each of the objectives of the responsibility right.

3. Target refinement to measurable

4. Estimate how many new people are needed to achieve the goal

5. Estimating Cost

6, with the industry benchmark

7. Global optimization

8. Implementation

Does this process seem to be a problem? If you're not an experienced manager, you can't expect to see a problem, but it almost ruined my company. In fact, the process is completely top-down, unless you want to create a culture of chaos and bankrupt your company, otherwise you should not follow.

Whenever I ask for a manager's needs, I unconsciously play the budgeting process. The game is played in this way: The goal is to have every manager build as large an organization as possible so that his role expands. And his own importance has therefore been promoted. Now you might think, "my company can't do that." Most of my employees don't play that way. "You see, the beauty of the game is right here." As long as one player joins the game and begins to play, the others will join and play hard.

Soon, as managers come up with clever strategies and tactics to improve their chances of winning, the game setup gets complicated. One of the common game techniques is to drastically expand the target range: "You say you want to promote the market image, I think of course you are referring to the global image." Naturally, you wouldn't want my vision to be centered on America. "To give the CEO enough stimulation, another great technique to use is claiming that once a company fails to meet its targets, it can be miserable:" If we don't raise our sales by 500% and our competitors do, we'll be left behind. " If we are too far behind, we will never expect to be No.1. If we're not No.1, we can't hire the best people, we can't ask for best practices, or we won't be able to open the best products and get stuck in the vortex of death. "As for competitors, there is little chance of an increase of 500% this year.

The problem with this process is also subtle: when I ask what the team needs to achieve their goals, they naturally assume they can get what they want. As a result, team leaders advertise their ideas to members and allocate new funds. As a result, their needs and morale are hopelessly tied together, adding to the benefits of a game. The VP in charge of marketing and I asked for 10 people and 5 million dollars in planning expenses when his team knew the plan. His team would be upset once a major cut was made on his plan, as they had just spent two weeks on a much more aggressive approach. "Kao! Ben Buckles so much. Should I find another job? "It has put a lot of pressure on me to make a very unwise excess spending plan," he said. The foam that my manager blew out of me blew me up a lot, and I embarked on a path of suicide that burned cash and destroyed culture.

The core of the problem is that my budget process has no constraints. We are a private company with no specific profit target to meet and a pile of silver on hand. The spending plan seems very casual. Without a rigid constraint, I could splurge.

One of the best rules of the budget plan is to maintain cultural cohesion. The enemy of cultural cohesion is the ultra-high speed of personnel growth. Annual expansion of more than one times the company, even if the new staff training and management done well, often there will be serious cultural drift (barely drift). Sometimes such growth is necessary and manageable in specific functional sectors such as sales, but in other sectors it is often counterproductive because of internal communication issues, which are essential in the engineering and marketing sectors. If the 1-year process is turned into 4 times-fold, its effectiveness may not be enough to double the number. And you're going to have to spend more money. What's worse, because new employees get no guidance, they do things their way, and you lose cultural consistency. Of course, there is no problem if you have a small number of people. It's no problem to increase from 1 to 4, or from 2 to 8. But if you increase from 50 to 200, you have a big problem and you have to be very, very careful.

Under the guidance of the principle of cultural cohesion, a much better budgeting process should be binding. Some useful constraints are as follows:

• Operating rate growth-this is said to be "run rate could", not "spend could (expenditure growth)". The total growth limit should be set according to historical expenditure.

• Income/Loss-if there is income, set the revenue or loss target for this year.

• The growth rate of the engineering team-unless the team is acquired and operated independently, or the engineering team is subdivided in a novel manner, it should not be more than 1 time times the overall expansion within 1 years.

• The engineering department and other functional departments of scale-engineering departments to make constraints, we should also set the size of the engineering department and other departments of the scale of the constraints.

After you make these global constraints, you should also take the following steps:

1, set out the constraint index and then cut the 10-25%, when necessary to allow themselves to expand space.

2. Allocate the above budget to different teams according to the appropriate ratio

3, communicate with the team this budget

4, the implementation of goal-setting practices, to encourage managers through the budget to achieve great goals to show their ability

5. If you think a team is getting more money to achieve a bigger goal, take a part of 10-25% 's Reserve Incentive fund to the team

Read here whether any of you think I have lost my mind. As a technical expert, you know that the worst thing is to be too restrictive before you start. You will stifle creativity and hinder yourself from achieving truly great results. And that's why I, as an engineer, are fighting this process: human factors can screw up the logic. To be specific, incentives, if poorly managed, can strongly motivate people to act and undermine overall goals.

It's important to realize that your little fast-growing company won't turn into a big elephant in advance.