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| David Cuykendall Click for Index Page |
The ‘predict and control’ paradigm of conventional planning and budgeting rests on the vertical cascading of authority through calendar-driven authorizations of expiring decision rights — enacted through the distribution of budgetary and planning reference documents. Further, the forecasts and targets recited in conventional budgetary and planning documents are based upon a dated assumed future, delivered through the latest revised annualized plans and budgets that are distributed in even, periodic time intervals.
Reference documents are not assets in the sense of reusable infrastructure. The goal should be to use documents as assets. Assets are reusable infrastructure. What makes an asset any different than an expense, a consumable? It depends on how many times you use it. If you only use it once, it is an expense. If you use it continuously, with continually refreshed information, it is an asset. You invest in assets in order to enable you to do something you otherwise are unable to do.
A living document or dynamic document is an asset; it is a document that is continually and quickly edited and updated within a disciplined framework for updates, changes, or adjustments. In contrast, reference documents are“enduring documents” — they change very slowly. Their role is compliance. They are ill-suited for implementing the working governance of process on live rolling basis. Living documents, in contrast, have the power to change formerly unmanaged processes into self-sustaining mechanisms that operate in real time.
Living documents convey coordinating mutualisms
Imagine a crew of oarsmen navigating a canoe through river whitewater who are instructed to obey a coxswain with a megaphone who shouts instructions to the beat of a metronome. A canoe coordinated in such a fashion would be quickly overturned. Intermediating instructions from a coxswain would merely block the immediate information the oarsmen require (i.e., direct observation of the actions of their fellow oarsmen) to successfully coordinate their rowing.
Two entities are closely coupled if they reciprocally interact; changes in one cause changes in the other, and the process goes back and forth in such a way that we cannot explain the state trajectory of the one without looking at the state trajectory of the other. This reciprocal interaction is a natural form of coordination known as coordinating mutualisms. Coordinating mutualisms are mechanisms used by furniture movers to maneuver through a house, or paddlers to take a canoe downriver, or jazz musicians playing a live engagement. They are useful when nobody really knows ahead of time how to do what they're doing. This squares with how life really is, rather than how it is imagined in the typical approach to planning and budgeting.
Role charters are living documents based upon the principle of coordinating mutualisms
Alternatively, there are a lot of other great things that can be done. For example, a tool known as a role charters can help ensure both effective decision making and collaboration. Role charters clarify accountabilities and decision rights and establish both behavioral expectations and metrics to ensure success. Further, role charters are simple instruments — living documents — which enable tough, timely conversations to take place. Living documents, because they are founded on the principle of coordinating mutualisms, redirect attention to the immediate, latest, and most relevant information. As living documents, role charters can be a powerful means of achieving high performance and financial control.
Role charters and financial boundary setting
Role charters can be used to set dynamic, event-driven financial control boundaries that might include “burn rate” guidance ("operate within this approximate activity level"), unit cost targets (“you can spend more if you produce more”), profit targets (“spend so that you maximize your bottom line”) or simply no target at all (“we’ll monitor cost targets and cost trends and intervene only if necessary").
These kinds of dynamic boundaries can be used to build a cost-conscious culture. The question to ask when making cost decisions is not: Do I have a budget for this? But: Is this really necessary? What is good enough? How is this creating value? Is this within my execution framework? Also, other questions to ask are: As things look today, is it affordable? Are the people available to do it? This information comes from real time information, not information embedded in the last formally adopted budget revision. This approach produces more tailored and responsive planning and budgetary controls. You get more control based on the value of immediate, relevant information.
Conclusion
The 'predict and control' paradigm of conventional planning and budgeting gets you less control. Stale information is distributed through reference documents that convey cascading authority and accountability on the principle of a dated assumed future and a misguided belief in the efficacy of ‘predict and control' — smothering the dynamic role of coordinating mutualisms in coordinating the enterprise.
