Managing costs provides a false sense of security
by Simon Baker, 5 February 2012 | The Agile Blogosphere
This post is from Energized Work | agile in action by Simon Baker. Click here to see the original post in full.
In the software world, budgets are mostly about headcount and capital expenditure. Headcount is managed by cost per unit, where a unit is a person considered to be more or less a uniform resource capable of producing fixed output. On a cost per unit basis maybe 100 people offshore are cheaper than 10 onshore. But in my experience, more people means more waste.The hidden costs in remote working don’t seem to factor into the overall calculations that inform executive decisions to offshore. These hidden costs include increased coordination and transaction costs incurred by having to work harder to keep things moving forward in unison. Plus there are likely costs from increased rework resulting from poorer quality of communications. Collocation makes a big difference for me because I want to experience the chemistry of face-to-face interactions. Nevertheless, distributed teams can work. Look at 37signals. It’s more about having people with passion and capability on the team, wherever they may be, rather than just units who tick the boxes on a skills matrix.
Ritual budgeting
Budgeting has become such a ritual I wonder if managers think it gives them operational control of everything going on? The longer a budgeting exercise goes on, the more it appears to be a game about guessing the number in some finance head rather than designing a suitable financial package based on engineering reality.
I do wonder if some people...read more
Great post Simon. I don’t know if you’ve ever come across any of the material or books on Beyond Budgeting? I think you’d like it. I can particularly recommend the book Implementing Beyond Budgeting by Bjartes Bogsnes. He recently presented at the ThoughtWorks Live event and he was great, he has a really great story about the stupidity of traditional budgeting and how he undid it all at one of the largest companies in Skandanavia!
Thanks Kelly. I’ve got the book but not read it yet. I’m looking forward to it though.