Secret CIO: Cut The Budget--Or Cut The People

Phil, our CEO, called a special meeting of the senior officers for 8 a.m., a half-hour before normal working hours. It wasn't a good omen. Then I saw the long sidebar table where the beverages and pastries should have been. It was bare except for a coffee urn and paper cups, a bad sign. Business problems may come and go, but the tradition is that we eat well, regardless of what crisis we face.

Exactly at the appointed time, Phil strode in, looking grim. About 10 minutes later, we all shared his expression. Over the weekend, Phil had reviewed the results of the annual plan we had worked so hard to develop. None of the three scenarios submitted--best case, worst case, and expected results--was anywhere near satisfactory. "Here I am," he said, "predicting in public that our business will show a slow but steady recovery, and our numbers indicate nothing of the kind."

The meeting was over in a half-hour. The business units were given, without comment, profitability targets; they could cut expenses or raise sales so long as the numbers were met. The staff groups were to cut expenses uniformly. Phil said he saw no need for prolonged discussion, just a need for action, nodded to us, and walked out.

I went back to my office and called my direct reports together. They were shocked. We had met our budget goals and accomplished some good things. They complained about how hard everyone was working, how we weren't appreciated, and how we were endangering the company by talking about cuts. I was reminded that Sarbanes-Oxley would add to our burden and security initiatives alone would require more money, not less. I was told it wasn't fair we had the same percent reduction as other, less critical, staff groups.

I let the talk go on without saying anything, and slowly they became silent. It was unlike me not to empathize or at least voice my views. Finally, when they had no more to say, I began:

"First of all, Phil wants lower expenses, and I've worked for him long enough to know that he won't change his mind. I agree with you--it's unfair, unwise, and even more important, painfully unpleasant. But the fact is, either we pull together to make intelligent decisions or we have outsiders, less competent than we, arbitrarily tell us what to do. Assuming we want to control our own destiny, we can begrudgingly cut or we can be creative and reflect the ability that we've shown to achieve outstanding results under difficult conditions.

"This company isn't making the money Phil is expecting. We have an obligation to the people in our organization to do all we can to ensure they have meaningful jobs that won't go away because we made stupid choices. In each of your areas, it may come down to cutting the budget or cutting people to get the same results. We have hardware and software expenses. Maybe we need better contracts or more innovative suppliers or a fresh look at our requirements. Or maybe in some spots we have more people than necessary. Remember, we're better off than some staff groups--all they have is their payroll to chop. So how about if we stop complaining and put our brains to work?"

So far we've been lucky compared with many IT groups. I want to keep it that way. It won't be easy, but we'll deliver the results Phil wants.

Herbert W. Lovelace shares his experiences (changing most names, including his own, to protect the guilty) as CIO of a multibillion-dollar international company. Send him E-mail at [email protected].

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