As consultants, we once helped a manufacturing plant director discover how we could save $20 million from his costs in the coming year. His response? “I don’t want $20 million. I only need $3 million to meet my objectives. Why would I contribute more than that?” The director contended that delivering the full improvement would hurt him in two ways. First, it would make it seem as though he had “sandbagged” his budget. If there was $20 million of cost saving available, why had he only offered to produce $3 million? Second, were he to deliver the full improvement that year he would be giving up $17 million “for free” that could otherwise be reserved for achieving future years’ budget commitments.
Why Two Financial Targets Can Be Better than One
Managers and employees should stop compromising on goals.
December 20, 2016
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Finance Essentials Course
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New!
HBR Learning
Finance Essentials Course
Accelerate your career with Harvard ManageMentor®. HBR Learning’s online leadership training helps you hone your skills with courses like Finance Essentials. Earn badges to share on LinkedIn and your resume. Access more than 40 courses trusted by Fortune 500 companies.
Strengthen your fluency in financial statements.