This system is rigorous it also works if senior

Info icon This preview shows pages 18–20. Sign up to view the full content.

View Full Document Right Arrow Icon
This system is rigorous. It also works. If senior management controls the quarterly spending meter, and the meter determines how fast money flows into the corporate pipeline each week, we can’t be surprised by what comes out at the end of 13 weeks. Controlling the meter does not mean I abdicate my role in monitoring expenses. With few “emergency P.O.” exceptions, the spending window at Cypress is open for two hours a week. Every Thursday from 8 a.m. to 10 a.m., we hold a purchase-order commit meeting with the vice presidents. They summarize the purchase orders that need my approval that week; I look for questionable expenditures and probe for extravagance. Even more important, the weekly meetings become a way of transferring best practices on spending throughout the organization. I invariably come out of them full of ideas about cost No Excuses Management 18 of 28 6/14/2018, 2:27 AM
Image of page 18

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
reduction that I immediately share with people who can benefit from them. A visitor unfamiliar with our system could sit in on a purchase-order commit meeting and conclude that the CEO of this $200 million company still signs every purchase order above the petty cash limit. That visitor would be correct in the literal sense but dead wrong about how the system really works. Indeed, our approach to expense control has cascaded down through all four levels of the company, to a point where I don’t worry about missing a purchase-order commit meeting. (I miss one out of three.) Vice presidents routinely take their weekly expense budgets and divide them appropriately among their managers to guide weekly budgets. In turn, managers take their weekly expenses and divide them appropriately among their subordinates, who take their weekly budgets and divide them among their contributors. Today our expense-control system virtually runs itself. It drives us every week of every month of every quarter. It’s no accident we have never exceeded a quarterly budget by more than 1%. Managers shouldn’t expect outstanding performance unless they’re prepared to reward outstanding performers. Yet evaluation and reward systems remain an organizational black hole for three reasons. First, managers aren’t very scientific about rating their people. They may be able to identify the real stars and the worst laggards, but the vast majority of people (who must still be ranked) get lost somewhere in the middle. Second, even if they evaluate people correctly, managers like to spread raises around evenly to keep the troops happy. This is a deadly policy that saps the morale of standouts who deserve more and sends the wrong signal to weak performers. Third, managers are totally incapable of distinguishing between “merit” and “equity” when awarding increases. Merit refers to that portion of a raise awarded for the quality of past performance. Equity refers to adjustments in that raise to more closely align salaries of equally ranked peers. Merit and equity both have a place in the incentive mix, but confusing the two makes for mushy logic, counterproductive results, and dissatisfied people.
Image of page 19
Image of page 20
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern