There are no big problems; there are just a lot of little problems.—Henry Ford (American industrialist and pioneer of the assembly line production method, 1863–1947)
This article is not about budget overruns. Well it is, but it isn’t. It’s bigger than that and much more useful. It’s actually about problem solving. Put these principles to work and you will be well on your way to reducing and or eliminating any problem you and your organization face, including budget overruns (B/Os).
I wanted to call this column, "Budget Overruns Aren’t a ‘Big’ Problem,” but there wasn’t enough room. If I had been able to go with that title, I’d have to confess that I’m well aware that any clear-thinking contractor realizes the serious consequences of B/Os. Nevertheless, both Ford and I insist—it’s not a big problem. But, it would get your attention, wouldn’t it? By the way, if you haven’t read part 1 you need to get your hands on last month’s issue and give it a quick read.
Eating the Elephant, a Bite at a Time
Before we get into B/Os, let’s talk about dissecting any problem and the process of solving the "little” problems that actually cause what we consider our "big” problems. Let’s think cause and effect. You don’t want to approach problem-solving without focusing on the cause. One must focus on the "little” problems that actually cause the larger issue. By doing so, you’ll find true solutions and be much more focused and effective. It’s also a lot easier to work on little problems instead of being overwhelmed by huge issues.
Last month I spoke of synergistic brainstorming. That’s the ticket. It doesn’t take a quote from Einstein to figure out that a group of concerned individuals who are stakeholders in the success of solving particular problems would be a much better approach than trying to be the sole brains of your organization. Someone once said that you must get "every brain in the game,” and I agree wholeheartedly. All of us together are smarter than any of us individually. Try eliminating problems by using a small group of those people who share the goal and responsibility.
Now let’s look at some problems we’ve found organizationally with regard to budget overruns.
Budget? What Budget?
The fact that you have a budget overrun assumes that you have a budget—but don’t be quick to assume that’s the case. If you have a legitimate budget it must be based on a thorough and complete estimate that covers every task, all related costs and necessary productions. Productions must be realistic, material counts must be accurate and any inaccuracy is one of the main culprits in budget overruns. The accuracy of each component in the estimate is vital to staying on budget.
Moreover, it assumes that everyone knows the budget. This includes accounting, all levels of management, every department, and right down to the entry level employee. People who aim at nothing hit it, and all too often you will find that there will be those involved who don’t even know what their particular budgets are or where they stand with regard to their budget. Any failure to generate that awareness sets up budget failure. One of my favorite questions when walking projects is to ask how the various individuals are doing budget-wise. You’d be surprised how often you’ll get that blank "deer in the headlights” stare.
There must also be a simple way to monitor that budget, one that assures progressive updates and organizational accountability to stay on budget. Everyone who needs to know must be kept apprised of how they’re doing on a weekly (better yet daily) basis. Moreover, when a budget begins to slip, a quick course correction must be made to bring the project back on budget, and whoever caused the slip needs to be notified, warned or at times replaced.
Finally, some people may be jaded because of past estimating/project management failure to provide accurate budgets, and consequently the budgets themselves have lost credibility.
The Devil Is in the Details
As we round-tabled B/Os and flushed out the "little” problems hiding in the issue, we used the following approach. For illustration’s sake, envision a square a square that’s 4 inches by 4 inches. The square represents the size of the issue you’re dealing with. Break that square apart into four quadrants. The quadrants should be titled with four problems that the group agrees are the most significant contributors to, in this case, B/Os.
We named our four quadrants as follows:
• Inaccurate or incomplete budgets.
• Unrealistic productions/lost creditability.
• Ineffective budget monitoring.
• Lack of awareness/accountability.
Next month we’ll continue the exercise, get into the solutions and show progress in reducing the problem of B/Os. Hang in there; it will be worth your while!
Doug Bellamy is president of Innovative Drywall Systems Inc. dba Alta Drywall, Escondido, Calif., where he is known for his proactive, innovative approach to our changing industry, and use of modern technology and cutting edge products and services.