It’s that time of the year when budgets are in the air. Whether it is the all-important finance ministry, corporate finance departments or the lowly executive in every function assigned the unenviable job of balancing the expenses and the receipts, budgeting is very much on the mind.
Having seen this budgeting cycle for many years, from different levels in the “budgeting food chain”, I have observed three distinct mindsets. For the purpose of this column, I will stay with the information technology (IT) industry.
The first mindset is observed in the years of plenty. This is the “more with more” phase. For us in India, these were the glory years from 1992 to 2000. Departments proposed and corporates approved fat budgets. There was spending like there was no tomorrow. The mood was one of splurging—on consultants, on branding, on employee shindigs and Thank God It’s Friday dos. It seemed as if there was a never-ending supply of moolah at the end of the tap.
And then, after the years of plenty, came the downturn. We saw this at the turn of the last decade, in 2001. This then was a time of “less with less”. Budgets shrunk dramatically. Famine had struck. Cost cutting suddenly took on a whole new dimension. Job offers out in the market were withdrawn, joining dates extended and hiring numbers put in a freeze. Fun parties, the ultimate motivational magic medicine, were abandoned and freebies such as T-shirts and on-the-spot awards melted away like butter on toast.
Sometimes, these cost-cutting initiatives were downright quirky—a case of penny wise, but pound foolish. One zealous administration manager stopped the newspaper subscription intended for the company’s reception area, but the cashew nuts for the executive dining room continued unabated. Many painful decisions had to be taken, the result of the extravagant largesse of the bountiful years. And heading the list were the subsidies—transport subsidy, canteen subsidy, health club subsidy… The list was long and the withdrawal of each meant significant pain, as any human resource (HR) head who has been through this phase will vouch.
This phase, though beset with the worries of a downturn and of less money in the bank, was actually a godsend for many departments such as recruitment, overworked and harried through the boom phase. Smart companies used this time to overhaul their groaning processes, to do much-needed spring cleaning and housekeeping. Idle talent was deployed to set in place strong mechanisms, which could help organizations spring back into action faster when the call for action came.
But the most productive mindset comes after the famine. I call this the “more with less” phase. Much like the famous proverb—“the poor man’s son is a miser”—companies were loath to open purse strings, even when they saw the good times coming. So every expense head that was approved underwent a postmortem. Internal cross-functional teams were deployed, instead of fat-cat consultants, to diagnose and solve organizational problems. New processes and programmes were designed, which didn’t stretch the budget, but were still able to achieve the new growth targets. For the Indian IT industry, this phase came in the aftermath of the 2001-02 downturn. It started in 2003 and lasted well into 2005.
This was a period of innovation and rebirth. And what came out of it was remarkable. I remember attending an HR conference at Ann Arbor, Michigan, around this time. The late, great C.K. Prahalad was talking to us on “Next practices in HR”. In a room full of HR honchos, I was the only Indian. I still feel the thrill, when he announced, pointing unequivocally at me, that “All next practices in HR are coming from this lady’s country and this lady’s industry”. This was Indian IT’s “more with less” phase.
What a great time this is for organizations. Prudence rules. New policies are examined through the fine comb of future implications. More money coming into the organizational coffers warms the corporate cockles. And judicious spend ensures more of it stays back home. Like they say, the “miser’s son is indeed a rich man”.
My fervent wish is that organizations see the merit in prolonging this phase. But, alas, organizational memory is short. And the pain of the downturn is quickly forgotten—my thumb rule—in about 24 months. Maybe, even less for trigger-happy organizations. And the spending spree starts all over again. And so after the last cycle, once again came the “more with more” phase in 2006 and 2007. The doors shut and so 2008 and 2009 were “less with less”. The “more with less” phase is now alive and kicking; but for how long? Hopefully, long enough for innovation without extravagance to get institutionalized.
Hema Ravichandar is a strategic human resources consultant. She serves as an independent director and an advisory board member for several organizations. She was formerly the global head of HR for Infosys Technologies Ltd. Write to Hema at email@example.com