Last week, in a group coaching, we explored the difference between leadership and management.  The debate went backwards and forwards as to whether leadership or management was more important.  The crux of the debate gravitated to how budgets are often used as leadership decision makers when they are actually management tools. The team felt that making spreadsheet-based leadership decisions, without an understanding of the operational and brand impact leads to significant leadership risks, and ultimately costs.  Inevitably, when decisions are 100% budget or financial target based, they haven’t considered quality, brand or delivery risks fully.  And, when the papaya hits the fan, the well-intentioned cost containment strategy falls short, and the recovery costs end up breaking the budget.

Financial management plays an important role in building a sustainable and healthy business and can’t be dismissed.  But how often is the budget used as the reason for the hard “No” that doesn’t require an explanation.

In December, we finished a group coaching program.  As the coaching unraveled, the middle managers shared how they had ideas that would improve their productivity, increase their impact and increase profitability for the business.  In one case, a manager being paid a management salary is spending 40-50% of his time completing menial tasks that should be completed by an intern or junior staff member.  The manager felt so passionate about his proposal to appoint an intern to work with him that he completed a detailed cost-benefit analysis that demonstrated the return on investment of the junior appointee and the potential profit opportunities for the business. The manager explained how he was not even given the opportunity to unpack and expand on his idea as “the budget and head count freeze” shut the idea down.

I am not suggesting that the idea was flawless, but it was not even considered because of budgets and headcount that were presented as “un-moveable”.  Middle Managers are often the answer to profit, efficiency and leadership challenges.  The risk of shutting down ideas without even exploring them is what leaves managers feeling disempowered and undervalued.  Their ideas stop being submitted and, instead of being the heart of innovation and operational improvement, the managers become compliant and disengaged. 

Budget is a management function.  It is a critical tool that should be driving operational performance and supporting leadership decisions.  How different would the above manager’s experience have been if his idea was explored with the added lens of awareness of the financial limitations.  How many creative ideas could have been explored to achieve the same desired outcome but adding the cost management element?  

Middle managers have the power to be the secret weapon for their executives to achieve incredible improvements and increase profitability because of their insight and awareness of the operations and client.  When they are guided and coached, they have an ability to find creative solutions.  Remarkably, when they understand the “why” behind the budget, they can help lead the team/division/business to exceed profitability and cost management expectations through innovation.

Leadership demands sight of the future, of leading the business and the team through difficulties and to remain a viable and sustainable team/division/business.  For leadership to thrive, we need to access innovation and creative thinking to navigate within our limitations.  Our budgets are simply one of the limitations.  Budgets can be the boundary and framework that drives creative problem solving.  Budgets are a management tool.   They are not idea crushers or big sticks to stop new ideas.  As leaders, when an idea is worth fighting for and the financial implications have been well thought through, the budget is a structure to be challenged, especially if the ideas could revolutionize and transform our businesses towards our strategic priorities.