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Spending attitude that's sinking your peers

Jennifer Azara
by Jennifer Azara
May 9, 2008
  • Cost Control
3 minute read
  • SHARE ON

OK, finance execs, say you had a magic wand. What’s the one thing you would change in your company? It might get some chuckles, but there’s one answer that comes up over and over.

That most-popular response: getting other departments to take more responsibility for their spending.

It’s not a new goal, but it’s one most of your peers struggle to get a handle on:

  • Only 39% of execs say they believed that all managers across the firm had a responsibility for cost management, while
  • A scant 16% believed that cost control was the responsibility of everyone across the organization.

That’s according to recent research by KPMG.

It is a winnable battle — no hocus pocus required. Here are three strategies your peers are relying on to get others groups to step up on spend control, with great success.

Strategy No. 1: Give ’em the tools

You know the No. 1 excuse for not taking more financial responsibility outside Finance’s four walls: “I’m not a numbers person.”

If you can make the process less intimidating, your odds of success are better. A great first step: Offering a little Finance 101.

Yes, there are plenty of “Finance for non-financial managers” seminars out there. And that may be a good idea for key managers. But there’s no reason you can’t hold informal mini-versions for all employees, so they know their debits from their credits. A little Excel primer may go a long way, as well.

That’ll help employees with the second part of this “education”: reports. If you’re going to ask people to take charge of their departments’ spending, you need to put the info in their hands that helps them make the best decisions.

Yes, there’s certain info you’ll need to highlight. But the companies that ask other departments what data they’d like to see, too, are the ones whose managers are stepping up the most.

You’d be surprised at the trickle down effect many companies see. By putting useful info and equipping folks with the tools they need, employees will start caring more about each dollar that goes out the door.

Strategy No. 2: Setting the bar

Another surprise: How employees will rise to a challenge when it’s put to them.

These days, most companies can’t afford not to question every line item in their P&L. You know there are opportunities to save in many places.

Let employees be the ones to discover them. One Controller we know set a blanket and measurable goal for his entire company: Reduce spending by 15%. Period. No other guidance was put out.

Realistically, they were hoping for a 12% cut but figured it would get departments to stretch.

And that’s just what they did. Departments can come up with some extremely clever ways to scale back. Since they’re involved in the decisions, they’re a lot less likely to resent them.

Besides, who knows better than these groups themselves what’s feasible and what isn’t to cut?

It paid off for this company — it blew away the real goal of 12% and cut spending by 15% across the board.

Strategy No. 3: Fast followup

But what if it doesn’t come that easy? Maybe some groups or managers will take to their new financial accountability better than others.

The key: Jump on problems fast. You might start meeting with individual managers after each month-end close to compare where they stand vs. their budgets.

Negative variances? There’s your chance to find out what’s going on before things get too far out.

No finger pointing. The goal should be to get managers to come up with solutions instead of excuses. And of course, to offer Finance’s assistance.

The most important thing is for managers to come out of those meetings with an action plan. That way they’re prepared to meet any goal you throw their way.

Jennifer Azara
Jennifer Azara
Jennifer, a member of the CFO Daily News staff, has covered business and finance for more than 22 years. She has written for CFOs, credit and collections professionals and accounts payable practitioners and has spoken at industry conferences on sales and use tax compliance.

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