ReThink Productivity Podcast
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ReThink Productivity Podcast
Chapter 10 - How can I budget better?
Sue and Simon discuss Chapter 10 - How can I budget better? from their book "Every Second Counts: How to Achieve Business Excellence, Transform Operational Productivity, and Deliver Extraordinary Results."
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Welcome to the Rethink Productivity podcast. Sue joins me today and we are now on chapter 10 of Every Second Counts. There's the kind of closing comments which we'll do in a separate episode and a bit on AA, but today we're talking about how can I budget better. Do you want to kick us off on this chapter, Sue?
Speaker 2:I think budgets can seem one of those kind of nerdy things. Actually, I think a budget model is a really important strategic tool that the business can use and it's got lots of different stakeholders that are able to use it. Fundamentally, the very senior teams in businesses are making decisions all the time about where they put resources in order to deliver their strategy, and I don't know how anybody does that effectively without a workload model. A workload model really means you understand the costs of your operation and allows you well helps you make decisions about where you want to put that money, where you want to be a bit tighter on things, where you want to put a bit of investment, and allows you to make those important strategic decisions, because there aren't many more important decisions than where you put your resources to deliver your results so should we get into the detail of workload models, what the inputs are, that kind of thing?
Speaker 2:yeah, I've been getting top line level workload models can get very detailed and very nerdy fast, and it's a top line level. It's really about understanding how long does it take to do the tasks that your team needs to do, how many times do they do it, and that's the sum of all that. Adding all those tasks and all those volumes together essentially tells you how much workload there is by company, by region, by area, by individual store or department within store, depending on how you structure it. So at the top line, it's really simple. The complexity is then as you get into it, because if you want, if you know how long it takes to put an item on the shelf, for example, as part of replenishment, have you got access to your volume data? Do you know it?
Speaker 2:By case, by amper, by pallet, by unit? However, you're doing it. So it gets more complicated, and that's the challenge is to keep it really simple, because how can you use the data that you've got? Make sure the times that you've got line up with it it, so you then keep it simple and you don't make it over complicated and there's a whole bunch, as you say, of complexity that comes with it.
Speaker 1:We've got things like Business decisions, so it kind of forces through, as you said, once you know how long things take and the volume. Also business decisions around minimum money requirements, maybe service we always seem to get into conversations around what allowance do you allow, if any, for customer service. So it forces the business to either finalise or confirm some of those things that might be great training allowances, for example but also to review them, if they've been there for a while, to make sure they're still relevant and fit.
Speaker 2:And it's things like time for how managers spend the time. So a lot of businesses will have a view on how much time their managers should spend managing. In reality, the majority of managers that we see at least dip at some point into doing workload well. Are you going to bake that into your model, which will mean you need fewer hours of somebody else, or are you going to assume that your managers are 100% managing?
Speaker 1:building the models only part of the work. Clearly you need good governance, good steering, project groups to help make those decisions, because you're making big strategic business decisions that could swing outputs by millions of pounds yeah, and it's really important to identify the stakeholders for it.
Speaker 2:It's like any change project, but because this has such big implications, it's kind of particularly important. So who are the stakeholders? So usually it's kind of a mix of there's some senior team people that have got a view on how they want to spend money and where you want to invest. You know, usually there's parts of the operation where you see there's been more potential for growth than others and it would probably be a good idea to put a bit more investment into those and tighten some of the others. So those are big strategic decisions that will probably be made by operational leaders.
Speaker 2:Finance usually have an interest in it because usually with an organisation there's some top level decisions about how much we're going to spend on the operational aspect versus logistics, versus marketing. So you know there's those big trade-offs right at the top of the company that are being made. So you know, having a robust model that other people trust is a really good start for those sorts of conversations and understanding. So there's lots of people that have got a view on it and if you're introducing a model for the first time, there might be more change. So if you've had a model for the first time there might be more change. So if you've had a model, so very often people have had something where it's either been based on, well, what you got last year plus a bit more that might be tweaked now.
Speaker 2:If that basis wasn't that good or has drifted over time, you might find when you move to the model that some outlets have got a bigger change than others and again, that all takes working through and deciding. Well, actually, can I really invest in the ones that should have extra money until I've released it from the others, and how doable is that over the over a short time period? So you do need some good minds to think about what's the best way to do it and ideally, a whole comms plan to go alongside it to make sure that it's not seen as just some black box that does things to people, but actually people see it as part of there's business reasons for doing all these things and this is how it fits and where it's all heading and it needs to live and breathe, doesn't it?
Speaker 1:so you've got to keep you up to date. Those conversations, quarterly model updates, half yearly, new budget year all need to kick back in with those people.
Speaker 2:Yeah.
Speaker 1:And I think the key here is about the models being fair and transparent.
Speaker 1:So the model will calculate a number. Our models will calculate hours, costs and FTE by location, by week day for some clients, and we do that in Excel and we've got our new ReBudget online tool coming through very soon. So keeping out on the website and socials for more information around that. But it doesn't mean that that's the number you have to use, because most organisations then get into a debate about what the output of the model is versus the finance three, five year plan salary number and how they align the two. So that's a different debate and we won't get into the detail of matching those two today because that's a very much a business by business decision, business by business decision. But the model should be seen as the fair way of allocating the available funds from a point of understanding what the start point is and then how much you have to squeeze that or add in to get to the number that the finance want to spend, so that the senior team really understand the compromises and trade-offs that are being made to get to the financial number in effect.
Speaker 1:Yeah and in terms of other applications for the model, we see lots of people using their various let's call them iterations or versions of the model. So you've got the one, which is live, that the stores, restaurants whatever it might be warehouses are working to, but there might be other versions that the team who managed the model are working to to cost impact of change yeah, because I mean, as we've discussed in other chapters, sometimes stopping a task isn't as simple as well.
Speaker 2:If I save that and it saves 10 minutes, I can take 10 minutes out everywhere because there might be impact of if you have a minimum number of people that you need on site. You know you can't, you might take out work, but if you can't take out the hours, then that's the sort of thing that you need on site.
Speaker 1:You know you can't, you might take out work, but if you can't take out the hours, then that's the sort of thing that the model will show you and in a world where cost is is clearly king and probably never more so than at the time recording, with coming changes in national insurance and other bits to employers. It's those scenarios of so what if we drive more transactions through self-checkout? What if we spend less time doing this? What if we reduce our minimum manning windows or overall numbers? Those are all the types of scenarios that the team should be playing with to come up with creative solutions. Now they might not be palatable and people might not like them, but, as again we've discussed in other chapters and at our forum last September, all the easy stuff's done. So we're now in a world of presenting options that previously would have been off the table, that are on the table because there's nothing else left to go at. So it's a great way to facilitate those conversations in a fact way and take the emotion out.
Speaker 2:It is, and obviously there is the view that gives you the per location or department view. But the fact that you can use the model to look across and say, okay, so how much is it costing to handle our stock, or how much is it costing to serve our customers, where are the, where's the time spent? So understanding that actually there's x million pounds spent there, it can kind of give that impetus to have a fresh look at something that perhaps people thought oh, we can't touch that before, because actually, as you say, once you're dealing with the facts, it allows you to take a much more clear-eyed view at where are we spending our money, where does it make a difference for our customers? Where does it fit with our strategy?
Speaker 1:Yeah. So in terms of quick wins, I've got a couple for you. I think one. If you've not got a workload model, now's the time to consider it. If you're listening to this, you run any type of business and you don't really know the cost of running that business. That would be a concern, because how are you going to make strategic structure changes to make sure you're protecting your colleagues and your customers? Making sure the hours of the model match the available budget, so they always need to be aligned. Making sure the hours of the model match the available budget, so they always need to be aligned. You can't give teams a number of hours that they then can't afford from a cash point of view to spend.
Speaker 1:Keep things as simple as possible. So there's always a danger that people want to add complexity because that makes them feel comfortable or gives the model a level of accuracy that people think is important or valid. We've seen them really simple, which maybe don't have as much complexity and is needed to get under the skin of variation and things that have a material impact, but also massively overcomplicated, where there's way too much information, which causes a problem in the transparency and the buying for it and also a problem in terms of the upkeep and ongoing maintenance of the the models well, we've seen situations where the biggest debates are about the tiniest amount of workload.
Speaker 2:You know, if people are having a debate about something that's 10 minutes per site, per quarter, for example, it's like it's not got material impact versus the the core of the work that you're happening. So you kind of get into materiality debate or you can kind of let emotion take over if you're not careful.
Speaker 1:Avoid black box models. So where it goes into a solution and you get an output and nobody can really explain or track that output back to the various calculations. And again, it's also very easy to let the model be run by individual people. They may move on sideways upwards somewhere different. And then there's an exposure in terms of understanding of the model, the integrity, how it works. So it there needs to be an understanding across a number of people in the business of how it works, just so you've got cover for any situation that arises. But overall, biggest tip is keep your model up to date. It needs to reflect changes in your business and processes. So if things stop, clearly that needs to be reflected in the model and you have choices about what you do with the potential saving, but that's got to work the other way. As work goes in, you need to reflect that in the model as well.
Speaker 2:Otherwise it becomes a kind of one-way tool to drive out cost and quickly becomes out of date because it's not reflecting reality and we have seen people that use a workload model that covers all the workloads so they cover kind of what's the whole, what's the overall budget.
Speaker 2:We have seen people that use start by using a very slimmed down model so they might just look at, kind of the core task that they're doing. So we worked with a client that was a warehouse and they wanted to be better planned at the resource that they needed. So a really simple model helped them understand right, if I've got this amount of deliveries coming in that I'll need to put away and this amount of orders going out this week, how many hours do I need? So they weren't counting in the time for training or admin or whatever, but actually it gave them a much better steer, whereas previously they were relying on an experienced individual. That news, oh yeah, for this week. We've always used 100 hours. It's like well one, whether was their intuition correct? And secondly, what happened when they were on holiday, if they went off sick, if they left? Because that business was dependent on one person's expertise of estimating how much workload there was absolutely so.
Speaker 1:We'll pause there. We'll be back with the final wrap of the book. We'll touch on the the kind of ai um chapter that's in there at the end and share our final thoughts. So thanks, sue, we'll catch up soon thank you hi.
