This article uses a department’s entertainment budget as a simple way to explain how the principle of decentralised decision-making should be applied at the team level. What’s more, you can expect teams to communicate and function better when it’s applied correctly.
Traditional “Project Cost Accounting” Scenario
Each department is allocated an ‘Entertainment Budget’, usually this is calculated as a Rand amount per staff member, e.g. R1,000 per staff member for a 200 person team which equals R200,000 to spend on entertainment for the year.
The expenditure is normally controlled by the head of the area. To spend money, pre-approval of the head is required. The approval process will involve a great deal of ‘waste’ in the form of justifications, negotiations and even mini-budgets needing to be prepared. On top of this, the “fear of asking” leads to many missed opportunities.
Entertainment budget is one of those things that often that gets frozen or taken away in the second half of the year to help make arbitrary cost savings or claw back over-expenditure in other areas. Therefore, savvy managers with a people focus try to spend the entertainment budget as fast and efficiently as possible before the annual budget cuts are announced. On the other hand, managers with a financial focus will spend as little of the budget as possible so that they have some buffer to play with when cost cutting comes in.
In practice, how entertainment budget normally gets spent goes something like this:
The topic of poor morale comes up in a management meeting. Management decides that a “Let them eat cake” approach is the best way to improve morale. One of the managers is tasked with “Cutting the cake”.
The manager is very busy (probably preparing budgets) and delegates the buying of cake to an admin. The admin is also very busy (probably chasing people for budget information for monthly reports) and therefore goes with the quickest and easiest option (with little regard for economic value). The cake choices are prioritised based on the boss’ preferences (which happens to be Black Forest).
Cake day arrives and Black Forest dominates the confectionary buffet. A large portion of the staff don’t really like cake* and they particularly detest Black Forest. However, the boss is thrilled because it’s his favourite and, after giving a long boring speech that sends everyone to sleep, tucks into several slices.
* One of the things I’ve learnt being on social committees and organising many functions is that when it comes to food and musical tastes you can never keep large groups happy!
Management pat themselves on the back for their great humanitarian cake drive. However, word gets back to them that the people are still grumbling. Management can’t believe that their ‘resources’ can be so ungrateful – and make the magnanimous decision that all remaining entertainment budget will be spent on team building dinners for themselves.
The year ends with gulf between the teams and management being greater than ever before.
The Ideal “Decentralised Decision-Making” Scenario
An entertainment budget is given to each team. To keep the math simple, let’s assume a 10-person team with a R10,000 entertainment budget.
The team can spend their entertainment budget any way they like: This means that the team can spend the money on whatever they like, whenever they like and however they like – without any additional approvals.
Of course, they could splash out on a slap-up dinner at a fancy restaurant and finish the evening knocking back Johnny Walker Blues and smoking Cuban cigars – but it’s highly unlikely that they’ll do that.
Instead, the team discusses how and what they want to spend their money on – this is in fact the ‘approval process’. The team decides to do fortnightly lunch. They immediately reject using the standard corporate caterers as they are twice the price of anywhere else (and they’ll only be able to do a monthly lunch if they go this route).
The team reaches consensus, everyone likes pizzas and there is a great takeaway pizza joint around the corner that does free deliveries – so that is the lunch option that they settle on. During the discussion one of the team members mentions that she has Celiac disease and cannot eat any gluten. Fortunately, the pizza joint does gluten free pizzas so that’s not a problem. Another member of the team does not eat any red meat, so the variety of pizzas chosen takes this into consideration.
The pizza lunches work brilliantly in January. In February, the team further reduces cost by buying two litre bottles of cooldrink instead of individual cans. They also decide not to buy bottles of water since there are perfectly good water dispensers in the office and single use bottles are bad for the environment. During the discussion on single use bottles, two team members who’ve been struggling to work well together realise that they both share an affinity for environmental issues. They bond over the discussion which improves their working relationship going forward.
In March, the pizza joint has a Magic Monday “two for the price of one” special. The team takes advantage of this by making the financially sensible decision to switch their lunch date to Mondays. Taking advantage of the “two for the price of one” special, they can now enjoy a weekly team bonding lunch without spending any more money. Morale has never been higher.
By April, the weekly pizza is starting to show and the team decides they need to start looking at healthier options. Based on wide differences in dietary preferences, the team decides that the role of lunch orderer will be rotated with the ‘orderer’ picking the restaurant.
The lunches have helped bond the team – and the team have been able to get much more value from their entertainment budget than if the finances were controlled centrally. However, the discussions along the way have also helped to cement trust, empathy and understanding within the team. Everyone is now comfortable to express their culinary preferences – and this has a knock-on effect of improving the overall quality of team communication. Catering for the religious, medical and/or personal tastes of each team member also fosters a culture of psychological safety rather than resentment.
Whilst those of us who still have ingrained Taylorism tainting our management methods might question whether all this time spent discussing and ordering food was well spent (“Surely the team should rather have spent their time producing more code?”). The famous Google study on what makes teams high performing showed that the secret ingredient was psychological safety.
Teams become psychological safe spaces when people learn to communicate better, not by staring at computer screens. Not only does applying decentralised decision-making to entertainment expenditure allow the same amount of money to go much further (and benefit the team much more), it also produces many fringe benefits during the process (like autonomy, improved communication and enhanced working relationships within the team). I guess you could call that the icing on the cake (or the extra topping on the pizza)!
Whilst you can never have your cake and eat it, with decentralised decision-making you can have your pizza and high-performing teams!
Afterword (picking up the crumbs)
If I had a Rand for every time I heard a manager say, “I want you to make decisions like it’s your own business”, I would be able to keep myself in pizza lunches for a couple of decades. The problem is that we ask our staff to behave like adults but treat them like children. If you really want people to behave like adults when it comes to spending money, you’ve got to give them the autonomy to spend their own budgets (and feast or starve by those choices). The entertainment budget is a good place to start.
Whilst this is a very simple example, the same idea should apply to all expenditure that team incurs – and should scale up the ladder as well (e.g. for hiring decisions).
Another example would be training – the team knows best what additional and new skills would benefit the delivery of business value, which conferences are likely to yield the best learning return and even what the impact of having a team member away at a conference for a few days will be.
They are likely to make better decisions and spend the training budget far better than even an exceptional people manager could. In addition, if I am accountable to my team for the time and investment in the training, I am much more likely to ensure that the team realises the benefits.
It is highly unlikely that you’ll get autonomous, self-managing teams without allowing them to be responsible and accountable for the vast majority of decisions that impact them.
Whilst eating lots of pizza is unlikely to make us lean, the same principles can be applied to get the benefits of lean budgeting in your organisation.Follow Running Mann: