Four Tips For Granting Teams Budget Autonomy

Money TrapEvery company I have been in has had a fairly rigorous process for approving budgets and purchases. More than once I have seen an organization spend hundreds, sometimes thousands of dollars worth of time to clarify, justify, vet, and double-check a purchase of less than $200. Instead of micro-managing purchases, what would it look like to empower people with budget and the duty to use it wisely; whatever they decide wise might be?

What Got Me Thinking

Today I placed a purchase for my South Bend Coworking Space, The Branch. It’s a 1-year old business that my wife and I are bootstrapping. We did not go raise a bunch of capital from friends, family, and fools. We decided how much we were comfortable risking, gathered market data to make sure we weren’t doing “stupid”, and launched the business.

We love the technology that supports the startups and telecommuters. Bootstrapping led us to getting good equipment that was good enough for the job, but not “high-end”. Our network switching equipment is leased, and our wireless router was effectively a “hand me down.” The router was very performant for the 14 months, but for some reason it restarted itself couple times over the last two or three weeks. My philosophy is that the technology should just perform. No hiccups, no problems. Technology should function so well that you forget about it. A network that drops during the day, even for 30 seconds a couple times over two weeks is not acceptable. It was time to upgrade immediately!

We contacted KineticIT, who’s been a reliable technology partner for us. We got a quote on a Cisco Meraki router, and decided to make the purchase. Upon realizing that The Branch did not have a Power Over Ethernet (PoE) switch to connect the router to, we got a call from our vendor. The question: Did we want to buy a PoE injector (about $100) or an AC Adapter (about $50)? Considering that we are in the process of expanding our operations, and that we have VOIP phones that also would benefit from PoE, I inquired about the price of a switch that would provide PoE. We got the quote, decided it was fair, and authorized the purchase of materials and labor. Without going into too much detail, it is easily an investment that goes above $1,000. And, the incremental expense for the switch was decided in under 10 minutes.

After reflecting on the purchase, I went back to the realization that I’ve had to try much harder to get approval for much smaller purchases. It led me to wonder: What would it be like if every company trusted its employees to make wise purchases similar to the investment I made. What if you could walk into your managers office to report, or you posted to the company’s intranet site that you just spent $1,000 on _________ because it allowed the company to do ________? As a manager, would you be OK with that? What scares you about it? Are you willing to try it?

After hanging up the call with my IT partner, my fellow agile coach, Susan DiFabio and I were brainstorming a bit. What about buying books? No problem. New furniture? No problem. What if they spent it on a team dinner. A nice one, to celebrate. Are you OK with that? My initial reaction to a scenario where they pocketed the money was “oh, heck no.” But then we explored it more. What if they pocketed the money? Think about it. If the team’s been busting their hump, feeling down, and wanted to give their team of 10 a $100 bonus each? Seems like money well invested. Compare that to the cost of turnover, and the $100 per person seems like one hell of a deal.

How To Structure The Autonomy

Are you willing to extend autonomy to your team around some amount of budget? Here are some tips for how to set up such an arrangement:

1.Don’t Be Cheap!

Make sure it’s enough. If you are only willing to give autonomy over $50, don’t run the risk of insulting your employees. Our brains have strange wiring when it comes to money. Offering too little indicates that either a) the company is in trouble and cannot afford more, or b) you don’t actually trust them to spend it wisely. You might feel that it signals something else, but I’m quite confident it won’t. It’s bad to signal either corporate insolvency or district, so make it a good amount of money.

To keep things in perspective, imagine a technology team where the total compensation is around $100,000 per person . if you have a team of 7, and they get autonomy over $1,000 total, that’s only 15 one-hundredths of one percent of the cost of the team! That doesn’t even begin to include the cost of furnishings, space, etc. So, don’t be cheap!

2. Don’t Be Stupid!

Decide how much you can afford to risk. Don’t risk more than you can afford. And, don’t offer an amount that if it all gets spent causes discomfort for the organization. If you can afford $5,000 across your 50 scrum teams, go for it. If you can’t, don’t.

3. Make it Public

Make the teams or individuals publicize the purchase and the benefit they see. Get the teams to share what they decided. There are a couple reasons for this. First, the sharing will perhaps give good ideas to other teams. Second, the social pressure of sharing what was purchased will help ensure wisdom.

4. Experiment

Run it as an experiment, but be careful if you end the experiment. Timebox the experiment. You don’t have to commit to it forever. Try it for a year or two. But, if you do decide to cancel it, just roll the amount into their base pay. As humans, we hate to lose things. If I use to get autonomy over $1,000 of the team’s money and you take it away, that will hurt. The pain will be lessened if you take the $1,000, divide it across the team of 7, and just give it to them as base pay.

It’s time to try it!

The idea is interesting to me, and I would love your feedback. Do you know anybody doing something related? How is it working out?

Just to drive the experiment home for me, I will be conducting it in the fall. Our coworking space business hasn’t grown to the point of supporting the addition of employees, yet. But, we are having an intern from Indiana University South Bend for the fall semester. I’ve decided we will give her a pre-paid visa card, and ask her to just use it wisely for whatever she sees fit, and let us know what she decided to do with it. Google ads for marketing? Fine. Banner to hang out front? Sure thing. Pocket money? Hmmm. If that’s going to get her out of a bind and able to get to work, or help with something else that allows her to focus. Sure. I’m a big fan of trusting folks to do the right thing. Of course, sometimes you get burned, and nobody’s perfect. Far from it. I hope to let you know how the experiment goes.

2 thoughts on “Four Tips For Granting Teams Budget Autonomy

  1. Alex Deborin

    Dan, this is very interesting subject and a well-written post! As I was reading through it, I started to think of a logistical way to give corporate people power to spend. Like, besides going to procurement, how else you can do it when you are part of somewhat larger (not a small business) organization. And then I got to the end of the post and there I go – you had an idea for me. Pre-paid cards! That should work even within the context of larger company. Would be interesting to get someone to try it out… Cheers!

    Reply
    1. Dan Neumann Post author

      Thanks for the comment, Alex. I do appreciate that some things are far simpler in a small organization. I think the challenge is that once a company is “large” it strives for efficiency and can crush the nimbleness that a small company once enjoyed. I’m glad the card seemed like a good way to do it; that takes the burden of an employee to lay out the cash themselves and then seek reimbursement.

      Reply

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