“We have to reduce costs. Please let me know you revised budget for the current year by next week.”
That was the one of the first things I heard in my new role as Chief Learning Officer at the University of Chicago Medical Center several years ago. It was my first meeting as a member of the executive team. My boss, the hospital’s COO, gave us the news.
A week later, I told my boss that I’d cut my costs 25% by the end of the fiscal year. He looked surprised. “Are you sure?” he asked, “I figured that you’d say 5%, 10% at most.” I told him that I took a quick look at my financials. My team was already 10% under budget and they weren’t even trying to cut. There had to be another 15% in there somewhere.
I went back and announced the news to my team. It was met with groans.
“Where are we going to cut?” they asked.
I told them I was hoping they could tell me.
But they couldn’t. No one had a good sense for where and how we were spending money. They knew if we were on budget or not overall. But, beyond that, they really didn’t know how that money was being used.
I was surprised. But it quickly became clear.
A few days later, my Director of Operations dropped a thick manila envelope on my desk.
“What’s this?” I asked. “Those are your operating reports. All of the Vice Presidents get them.” he responded.
My first thought was that those definitely were not MY operating reports. I didn’t ask for them. I didn’t design them.
They probably weren’t going to help me do my job.
My suspicions were quickly confirmed when I opened the envelope.
The first report was the “Bed” report. This is a very important report to a hospital. It shows the usage and turnover rates for all of the beds in the hospital. In a hospital, if you aren’t turning beds, you aren’t making money. It was a great report but there was one problem. I didn’t manage any beds. I ran the corporate university. Now, it turned out that I actually had three beds in one of my classrooms. But those were always occupied by dummies upon which people learned to perform various procedures. My beds weren’t included in the report. I didn’t need it to run my part of the business. 0 for 1.
The second report was the staffing and overtime report. Again, a very helpful report if you are running a unit or department with people who are paid an hourly wage. Staffing gaps mean reduced quality and service. Overtime means extra cost (since overtime is paid at 1-1/2 times the regular hourly rate). Many leaders lived and died by this report. Not me though. My entire staff was salaried. Overtime didn’t impact my budget. Of course, from a productivity and engagement standpoint, it was helpful to understand when my team was working overtime. I only had thirteen people. A simple walk down the hall at the end of the day told me all I needed to know. 0 for 2.
I came to affectionately call the final report the “stuff” report. If you’ve ever looked a detailed breakdown of your hospital bill, you know that hospitals are meticulous at tracking stuff (sterile gauze pads, bandages, needles, alcohol wipes). Stuff adds up on a unit. It’s important to not waste it.
I had stuff too. The problem was that I didn’t make decisions based on the consumption of stuff. I ran programs. The report told me, to the cent, how much I spent on food or office supplies. However, it provided no visibility into what I spent on Leadership Development or New Employee Orientation. Those were the things that I needed to make decisions about. 0 for 3.
Were the standard executive reports bad? Of course not. They were extremely helpful for about 90% of what a hospital needs to focus on. They just weren’t helpful to me.
If I was going to cut my costs by 25%, I needed to know how my department was spending based on the decisions we made with regard to money.
I went to my boss and asked if we could add some new budget codes to the accounting system. I didn’t need many, just one for each of my program areas with sub-accounts for payroll and non-payroll expenses.
After he stopped laughing, he gently told me “No”. He said that my budget was a rounding error in the $1 bil overall operating budget of the hospital. They weren’t going to add additional codes for me.
Undeterred I said, “OK. So if my budget doesn’t materially affect the overall numbers, can I just use some of the existing codes for my programs.” He looked at me sort of funny and said, “fine”.
I proceeded to assign my programs to the various budget codes of the hospital.
Then, when I’d get the monthly stuff report, I’d simply re-map the names of the budget categories to my programs. Now I had a report that we could work with.
Original report categories
Revised report categories
Jackpot. Within ten minutes of sending the first revised copy of the report to my team, I received an email from one of my Directors. She said, “Did you see that we spend twice as much on Employee Orientation as we do on Leadership Development? Maybe if we spent more on our leaders, we wouldn’t have to keep hiring new employees to replace the ones we lost.”
My team finally had visibility into our part of the business in the way that they thought and, more importantly, made decisions about the business.
At the end of the fiscal year, we came in 27% under budget.
I’d love to say it was because of my extraordinary leadership skills.
But it wasn’t. It was much simpler.
All I did was provide a goal and then provide information that was aligned with their decision-making relative to that goal. My team did the rest on their own.
You don’t have to put up with metrics and reports that don’t help you make decisions. In fact, if you do, you are putting yourself at a disadvantage.
Think about what you need to run your part of the business. Then align your data and reports with your decisions. It might require some creativity and technical expertise. But it’s worth it. Once you can see things in the same way that you manage them, you will start driving better and faster results.
Brad Kolar is an executive consultant, speaker, and author with Avail Advisors. Avail helps leaders simplify their problems, decisions, data, and communication. You can reach Brad at email@example.com.