Business Lunch Podcast Summary
Episode: Rethinking Corporate Budgeting: Lessons from a CEO's Radical Experiment
Release Date: January 10, 2025
Host: Roland Frasier
Guests: Ryan Deiss
Introduction
In this episode of Business Lunch, host Roland Frasier and guest Ryan Deiss delve into a transformative approach to corporate budgeting, inspired by a radical experiment conducted by the CEO of Bear, a major enterprise. The discussion centers on moving away from traditional long-term budgeting towards dynamic 90-day cycles, aiming to enhance agility, reduce bureaucracy, and foster a more responsive organizational structure.
Traditional vs. 90-Day Budgeting
Roland Frasier introduces the topic by referencing an article from Business Insider, highlighting Bear's CEO critique of conventional budgeting as the "worst of corporate bureaucracy." Instead of committing to rigid one-year to three-year budgets, Bear adopted a system of 90-day cycles to better adapt to the fast-paced business environment.
"Budgets represent the worst of corporate bureaucracy."
— Roland Frasier [00:56]
Ryan Deiss echoes this sentiment, emphasizing the limitations of annual plans and advocating for shorter cycle times to gain greater insight and agility.
"I think that the annual plan is the worst unit of measurement that there is. I think the anual is a spork. It is too much time to be predictable. It's not enough time to do anything meaningful."
— Ryan Deiss [03:57]
Implementation at Bear
Bear's approach involved not just altering the budgeting cycle but also reorganizing teams every 90 days, resulting in the elimination of 5,500 mid-level management positions. This restructuring aimed to:
- Flatten the Organization: Reducing layers of management to enhance communication and decision-making speed.
- Enhance Focus: Aligning teams around short-term goals to ensure concentrated efforts on immediate priorities.
- Cut Costs: Streamlining operations by removing redundant managerial roles.
"They have better communication, they've reduced their costs, they're more focused and present on what's going to actually happen over the next 90 days."
— Roland Frasier [02:00]
Adopting a Similar Philosophy
Ryan Deiss shares that his company has been practicing a comparable strategy, planning around 90-day sprints aligned with a three-year target. This long-term vision serves as a broad framework, while the 90-day cycles allow for tactical adjustments based on real-time data and market shifts.
"We're not speaking to necessarily how we're going to get there, but just what do we believe is possible based on everything that we know today."
— Ryan Deiss [03:57]
He further illustrates the flexibility of this approach:
"Every 90 days we have new information... it's like flying a plane and constantly checking in to adjust your course."
— Ryan Deiss [04:30]
Applicability to Small and Medium-Sized Enterprises (SMEs)
The conversation shifts to whether this 90-day reorganization model is scalable and effective for smaller businesses. Roland Frasier contemplates the feasibility of implementing team reorganizations in companies with significantly fewer employees, questioning how to maintain efficiency without the extensive resources of a large corporation.
"So let's talk about that though. In, is it possible? Would it make sense in, you know, what's scalable? Have 20, 20 employees issue?"
— Roland Frasier [18:00]
Ryan Deiss responds affirmatively, sharing experiences from his own company where projects required cross-functional teams that periodically reassigned members based on project needs. He emphasizes the importance of project leads who can dynamically allocate resources and prioritize tasks to meet quarterly goals.
"The project lead essentially gets to pick their team and they say, these are the people that I want."
— Ryan Deiss [25:11]
Forming and Managing Project Teams
The hosts outline a structured approach to forming and managing these dynamic teams:
- Project Identification: Determine key initiatives that align with the company's three-year targets.
- Project Lead Selection: Assign a dedicated leader responsible for the project's success.
- Team Assembly: Allow project leads to select team members across departments, fostering cross-functional collaboration.
- Support and Stakeholders: Designate support roles and stakeholders who provide input and approvals at various project milestones.
- Regular Check-ins: Implement weekly meetings or asynchronous updates to ensure accountability and track progress.
"Again, there is no such thing. The organizational structure is just whatever that structure needs to be to support the goals of the company today."
— Ryan Deiss [21:12]
Roland Frasier underscores the importance of adaptability and clear communication in this model, suggesting that even SMEs can benefit from periodic team focus adjustments to tackle specific challenges effectively.
Challenges and Considerations
While the 90-day cycle model offers numerous advantages, both hosts acknowledge potential challenges:
- Resource Allocation: Ensuring that employees are not overextended and that their primary roles are respected outside of project commitments.
- Organizational Buy-In: Securing agreement from all departments to support dynamic team changes without friction.
- Management Skills: Leaders must adeptly handle negotiations and prioritize projects to maintain harmony and productivity.
"This discussion is had at the leadership level, period. So this is at the leadership level."
— Ryan Deiss [24:01]
Conclusion and Actionable Insights
Roland Frasier and Ryan Deiss conclude the episode by encouraging listeners to experiment with the 90-day budgeting and team restructuring model within their own organizations. They propose initiating a trial run for the first quarter of 2025, assessing its impact on focus, efficiency, and overall business success.
"If you like this, please share it. Let's get lots of people doing this."
— Roland Frasier [34:18]
Ryan Deiss reflects on past experiences where siloed teams hindered project progress, advocating for a more integrated approach through dedicated project teams that can pivot as needed to meet quarterly objectives.
Key Takeaways
- Flexibility Over Rigidity: Moving away from annual budgets allows businesses to adapt swiftly to market changes.
- Cross-Functional Teams: Dynamic team assemblies foster collaboration and eliminate departmental silos.
- Leadership and Accountability: Strong project leads and regular check-ins ensure projects stay on track and align with long-term goals.
- Scalability for SMEs: Even smaller organizations can implement 90-day cycles by focusing on key initiatives and resource reallocation.
Notable Quotes
"I think that the annual plan is the worst unit of measurement that there is. I think the anual is a spork. It is too much time to be predictable. It's not enough time to do anything meaningful."
— Ryan Deiss [03:57]
"We're going to do these things in 90 days almost like a sprint."
— Roland Frasier [02:50]
"Execution in 90 day cycles, we found, works the best planning out, you know, broadly in three year cycles."
— Ryan Deiss [04:10]
Final Thoughts
The episode offers a compelling argument for rethinking traditional budgeting and organizational structures. By adopting shorter budgeting cycles and flexible team dynamics, businesses can enhance their responsiveness, reduce unnecessary bureaucracy, and align more closely with their long-term objectives. Listeners are encouraged to consider how these strategies might be tailored to fit the unique needs of their organizations, regardless of size.
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