How did your last budget meeting go? Did it feel like an exciting exchange of ideas among colleagues who wanted to move forward together, or was it a warmed-over version of a similar meeting you had last quarter – or even last year? While the former version might be idealized, the latter image of a budget meeting that feels like something from “Groundhog Day” is all too familiar. Here’s some food for thought to get your next meeting out of its established patterns of pushing and pulling and move it toward an opportunity to advance together.
Inertia acts as a counterweight for businesses trying to move ahead with innovative ideas. It’s human nature to maintain the status quo, but doing so rarely gives you the chance to propel your company forward and carry it past the usual tug-of-war between those who develop budgets and those who spend the money. Thought exercises that use extraordinary premises can sometimes shed new light on a knotty budget issue. Having the marketing department brainstorm about what it would take to double sales or giving the IT department the challenge of deciding how to prioritize projects if given a third of last year’s operating budget, can dislodge the inertial weight that holds discussions back.
Pinpoint Meaningful Metrics
You know every bit of financial data matters, but not every department prioritizes those figures equally. By identifying key performance indicators and deemphasizing the details that don’t have as immediate an impact on performance, you cut to the heart of a budget debate. You can’t include every factor that influences sales, but you and your sales department can look at some of the major ones such as market size, geographical area and market saturation. Focusing on those big influencers lets you develop realistic budgets while moving you past discussions about the details that may not have much impact yet become bones of contention in lengthy meetings.
Note How Facts Fit Together
Numbers can influence viewpoints even when we don’t realize it’s happening. In a study about perception and how it can change in context, a large audience was split into two groups that heard the same brief speech about Mahatma Gandhi. Half of the audience was asked if Gandhi was older or younger than nine when he died; the other half was to choose whether he was younger or older than 140. In both cases, the audience overwhelmingly picked the correct answers, but the interesting part is how they answered when asked to estimate Gandhi’s age at death. The first group’s estimate was 17 years younger than the second group’s even though they heard the same speech. The only difference was the age in the questions, yet that difference made a big impact on how answerers thought about the subject.
Be Aware of Anchors
Why did the people who heard the lecture about Gandhi give such widely divergent answers when asked to estimate his age? Psychologists call this bias anchoring – one piece of data holds someone’s attention and drags the rest of his or her thinking with it. Logically, you know Gandhi was neither younger than 9 nor older than 140, yet hearing these wildly inaccurate figures makes you subconsciously lean toward them. To introduce real change in your meetings, you may need to be aware of these hidden anchors and biases even in yourself and look outside the usual context of your data. Sidestep anchors by re-framing numbers in terms of percentages or ratios as well as the figures themselves. Just being aware of the tendency to drift toward anchors can be enough to blunt the effects of this psychological quirk, so point it out to your audience when you see it happening.
Be Aware of Anchors
If you’re building a treehouse and start with a yardstick that’s off by half an inch, you can account for that inherent error and add that half an inch to all your measurements. Try the same tactic measuring each successive piece of wood against the one before it, though, and that half-inch inaccuracy grows to many times its original size. Errors multiply over time unless your measuring instruments are calibrated. That’s as true for budget discussions as for treehouses. If you use last year’s figures that are predicated on the data from the year before without holding them up to a rigid yardstick, you’re incorporating increasingly unrealistic results into your data.
Moving past sticking points is essential to your organization’s health and your productivity. Step away from the deadlock with new modes of thought and better models that reflect the realities of your budget today.