A Wall Street Journal a few weeks back described how "CEOs Fight To Prevent Discretionary Spending From Creeping Back Up." I have absolutely no idea what that means. There are two kinds of spending: Spending for activities that add value for customers, and spending for activities that do not. I don't know how either of them can be 'discretionary', or why they would 'creep back up' or why it takes special focus from a CEO to control them.
I think it is a safe bet that the CEOs who need to fight to control whatever these expenses are (1) have not defined value adding particularly well for their organizations, and (2) have not demanded accounting statements that clearly delineate value adding versus non-value adding expenses.
I would like to give the boys and girls who work for the companies in which their CEO's are "fighting" with them (and I would be interested in finding out what school or leadership book led these CEOs to think that 'fighting' with their employees is a good thing for the boss to do) the benefit of the doubt and assume that they want to spend company money because they think it is a good investment. The CEOs apparently think otherwise – hence the need for a 'fight'.
"Deloitte last year cut spending in half on 'nonclient' travel, or trips that aren't to meet clients. But earlier this year, Deloitte CEO Barry Salzberg noticed that spending on flights and hotels starting to creep up; employees were eager to start traveling more. 'We are getting concerned that people have a very positive outlook and therefore that translates into, 'I can meet with you live, I can travel more,' says Mr. Salzberg.
It would seem Mr. Salzberg thinks non-client travel is not value adding. It would seem that some of his employees believe otherwise. I suspect the issue is probably rather complicated and that some non-client travel adds value and some does not. This begs a rather obvious question – namely that Deloitte is in the business of helping companies be more profitable and if they don't know how to define and eliminate wasteful (non-value adding) expenses than how on earth are they capable of doing it for others? Regardless, it seems that "non-client travel" is too broad and they need to break it down a bit further in order to get a clearer picture of things.
"Executives discourage employees from traveling to meetings that are expected to last less than eight hours, and recommends using video and Web conferencing when possible instead." That does not strike me as a very well-thought-out criteria for deciding whether airplane tickets and hotel rooms are worthwhile investments in creating value in the eyes of customers or not. I have to believe they can do better than that.
The alternative to all of this fighting and extra effort on the part of CEOs is to get to work defining the value proposition. That advice is good no matter what company is involved or what industry they are in or what they think of lean. It seems to me that if the CEO and all of the troops are not on the same page when it comes to knowing what the company does to create value for customers, then they have a huge problem. I expect there is all sorts of fighting going on inside the company when you have a kitchen teeming with hundreds of cooks all working off of a different recipe.
Once there is consensus about value adding and not, the CEO then has only to traipse up to accounting and tell them from now on, separate the value-adding from the waste on the accounting reports, stick his fingers in his ears to block out any braying about GAAP and Sarbanes-Oxley, then go back to work. No more 'fighting', no more silly CEO mandates about using both sides of sheets of paper, no more arbitrary rules about meeting lengths. If they are confused, show 'em this basic example:
"Over time, abuses creep in unless you focus on it," says a CFO in the article. Abuses of what, I wonder. The answer, I assume, is abuses of expenses the CFO unilaterally believes should be minimized. I suggest the CFOs of any companies in which CEOs and CFOs are 'fighting' with their employees over 'abuses'; and where CEOs are devoting their time to decidedly non-value adding activities such as charing 'corporate level groups' to approve office space requests; and where the CEO is writing policies for copying machine use think about spending a few corporate travel bucks and head to Las Vegas next month for the Lean Accounting Summit. Talking about accounting for excellence with some of the best run companies in America is a lot better way to spend your time than fighting with your employees over the settings on copying machines.