Meanings are not determined by situations, but we determine ourselves by the meanings we give to situations. – Alfred Adler
I’m not really sure how it started, but one day a couple months ago I found myself diving down an internet rabbit hole in search of more information on a guy named Alfred Adler. Adler was an Austrian psychotherapist in the early 1900s who, although a good friend of Sigmund Freud, developed a theory of individual psychology nearly the opposite of Freud’s.
Adler’s perspective can most simply be described as “look forward, not backward.” Whereas Freud focused on how the past affects current decisions (etiological), Adler suggested focusing on how a current decision will affect the future (teleological). Like every varietal of both legitimate and fad psychological theory, this spawned some self-help books. Not usually my genre, but I came across a fascinating book with a unique presentation style, and spent a few days knocking it out.
The Courage to Be Disliked by Ichiro Kishimi and Fumitake Koga is sort of like Adler meets Stoicism. The entire book is a Socratic dialogue between a student and a philosopher, which helps make it an enjoyable read for the non-psychologist. It doesn’t veer off the deep end too often, and simply tries to help you reframe your perspective to focus on a future driven by goals that then guide current day decisions.
Now the reason I will sometimes venture into individual psychology is because there’s often an analogue to organizational psychology or even basic organizational leadership. This book slides right into that, and I immediately thought of several relevant parallels.
Consider the craziness of budgeting that most organizations unfortunately endure. Sometime around September or October the process will begin, looking backwards at financial history then imposing some arbitrary mandate like “keep spending flat while increasing sales 25%.” That preliminary budget will go up the chain, get bloodied up to further veer from any potential reality, and after lots of anguish and gnawing of teeth, will be set in stone retroactively around February or March.
At which time it’s already outdated and the underlying assumptions, if there were any meaningful ones to begin with, have probably diverged from current business reality. Therefore it’s obviously time to start spending countless hours on variance analysis, coming up with explanations for missing budget, and presentations to executives on what will be done to fix it. To top it off, the entire process is based on an arbitrary calendar year, which is usually completely unrelated to desired business activities which are often unrelated to creating customer value.
A decade ago I was president of a mid-sized medical device company. We were well into our lean journey, and I was starting to think about lean accounting. I dragged our CFO to one of the first Lean Accounting Summits, where there were several presentations on the craziness of budgeting, the silliness of arbitrary calendar year timeframes, and the incredible waste created by the budgeting and then variance analysis process.
At the end our CFO looked at me, nodded, and the day we got back we told the entire company that we were going to stop budgeting. Effective immediately. As a private company, we could do that. We stopped, and after some initial panic the accounting department found they could now spend a lot more time helping the operations group analyze and thereby improve costs, and the other departments could focus on improvement.
We stopped looking backwards and using the past to guide our decisions. Instead we set goals for the future and made financial decisions with that in mind. Those goals were tied to hoshin plans, and reviewed quarterly. Although we still reported financials monthly with a calendar year summary, projects and goals, and the associated funding, were not tied to the calendar year.
(Side note: one interesting downside we observed after a couple years was that the old traditional budgeting process had provided a lot of informal Finance 101 training for the non-accounting folks. Without budgeting we ended up having to find other ways to provide that exposure.)
Yes, understanding the past can be important for context. But just as with a balanced individual life you should put the past behind you and focus on the future, spend most of your organization’s time looking forward, focused on goals that are tied to principles, strategies, and creating customer value.