McKinsey tells us how this happens: Anchoring in last year’s budgets, executive bias for pet projects, organizational inertia, autopilot budgeting and politics. Playing for themselves and their teams, leaders are loath to receive fewer funds than last year regardless of where and how the company looks to grow.
So financial, people, and operational resources that should be concentrated where they can pack the biggest punch get watered down and spread thin across non-essentials.
Re-directing them is the difference between growing a little and growing a lot.
- Start from zero—not from last year’s budgets—to think through and build what’s needed to achieve goals;
- Do question what appears to be “use it or lose it” activities and challenge their relevance to strategy;
- Get tough on long shots despite leadership kicking, screaming, pleading;
- Be alert to how and where competitors are using their growth funds;
- Seek an independent assessment to point out resources that can be applied elsewhere to accelerate and pull ahead faster.
Review regularly to see what is and isn’t working and be willing to re-allocate.