Silos and spend management: why we need to talk about Steve

In case you hadn’t noticed, we are no longer in a recession.

To avoid regretting decisions, we need to make better decisions. Or manage the situation so we don’t need to make them at all.

It’s a funny one, that one. People will concede a recession is looming. But once it hits, and while we are in it, nobody utters the ‘R’ word. It is the Macbeth of the finance world. The Voldemort of fintech. We talk around it, but do not speak its name.

Nobody admits it’s happening until it’s over and then we go ‘ah, yes, the thing we didn’t admit was happening is finally over’. Twas ever thus. And this latest recession was no different. We called it. We endured it without speaking its name. And now it’s over.

And yet nobody is relieved. Have you noticed nobody is relieved?

The business mood globally is one of anxiety. War. Political instability. We seem to be going from one set of headwinds into the next. A protracted, sustained period of stress that went into overdrive with the Covid pandemic and sort of stayed in overdrive, with events just piling up on top of each other. Unrelenting.

Everyone has been treading cautiously for a few years now. Keeping an eagle-eye on cost. Taking no unnecessary risks. Postponing expansion.

And in the tech and fintech world, there has been relentless cutting. And look: nobody has enjoyed the process.

Finance teams tried to balance the books and build a buffer. Cutting the nice-to-have activities and benefits first. The team-building budgets went, the company swag cupboards were bare and the punnets of blueberries in the office pantry were replaced by sad-looking apples. And then those were gone, too.

Then came the next step of cutting the essential but not existential stuff: training, perks, expansion. No new offices. No new colleagues. Hiring freezes and no replacements for folks resigning or going on maternity leave.

And when that wasn’t enough… and it rarely was enough as we saw… cutting into the workforce. Sometimes deep. A lot of companies did it. Some more effectively than others.

In Pleo’s recent Finance and Business Synergy Report, 85% of participants shared that they had drastically reduced spend in the last 18 months. A universal story, that one. But that’s not the part that caught my eye.

What caught my eye was that roughly half of the respondents admit regretting drastic cost cuts. The number varied slightly by market but stayed resolutely around 50%.

That’s a lot.

Although part of me wonders whether the rest of the folks interviewed regret it, too. They just don’t want to admit it because it is next to impossible to know what to do instead.

Because the reality is, inside our organisations, we don’t call… we don’t write… we often make sure that the right hand doesn’t know what the left is doing. Especially if the left hand is sales, making revenue, driving the business, and the right hand is the finance team who impose what feels like ridiculous budget restrictions that boil down to teams having to tell clients not to order the steak at a business dinner or having to stay in hotels out of town in expensive cities because… budget cuts.

Don’t get me started.

I have a good friend who was put in a hotel in central London where the rooms had no windows but was in-policy cost-wise (my offer of a spare room won’t seem beneath him next time), and I once stayed essentially inside the train station in Sydney, adding the insult of constant noise to the injury of jetlag.

But is it really the finance team’s fault? Is it their fault that they are trying to control cost? Is it their fault that this is the way they choose to do it?

The reality is, those of us not in finance try to avoid speaking to finance if we can help it. 59% of respondents in the Pleo report admitted considering finance difficult to work with, because they are intimidating or because it feels like if you don’t watch your step with finance you will get in trouble.

Meanwhile, finance themselves are mired in admin and are tearing their hair out thinking ‘if I knew what you were trying to do, I would help you’. A staggering 66% of finance professionals questioned in Pleo’s report admitted that if they had better insight into what their colleagues are doing, they would make better decisions.

It seems that companies are not connected internally, and the purpose of decisions and discipline around values is not universally upheld in time or across divisions. So, when the time comes to cut costs, the sensible thing to do would be to slim down.

When you are on a diet, you don’t ever think that ditching your liver or your left arm is a good way of shedding a few pounds quickly. You understand, even in the loosest possible sense, that weight loss is about losing the excess. Wherever that is. It’s not about making up the number. It’s not about hitting the desired weight at whatever cost.

I know it’s a gruesome analogy, but when a finance team (who has not been consulted or sighted on budget allocations when the times were good and has no visibility of what is happening behind the numbers inside your vertical) asks you to cut 10% across the board, that is exactly what they are asking you to do.

Being asked to cut 10% of your workforce would be no problem for someone (let’s call them Steve in this fictional example, as a placeholder) who voraciously grew their team to 600 people. He can afford to lose a few.

If you are someone, however, who kept an eagle-eye on cost at every juncture, even when Steve was spending hand over fist, being asked to cut 10% could be incapacitating.

Not to mention unfair. Almost like the process is rewarding Steve. Who isn’t real. But the problem is.

Meanwhile, in this scenario, executive team meetings become bitter horse-trading rows about making numbers. And those will be so consuming that nobody will have the conversation about whether Steve responded to poor performance through hiring. What we call ‘throwing people at the problem’.

But we don’t do that, do we?

Because we have no time.

Because this is hard enough as it is.

Because you would be opening not one can of worms, but ten of them, as the cumulative conversations we have not had with finance and each other would need to be unpicked to get to a place where we all are looking at the same facts and can make decisions.

Decisions that, 66% agree, would be better if we had better information.

Decisions that we wouldn’t need to regret. If we had made them on more holistic information, in a more timely manner.

Decisions that maybe we wouldn’t have needed to make at all if we had shared what is being done and why and how it can be done better in the spirit of ‘we are in this together’.

What would it take for the 85% who had needed to cut costs in the past 18 months to not need to do that at all?

I am going to go out on a limb and say it would have taken for Steve to not be a greedy so-and-so who threw bodies at his performance gaps and money at his lack of managerial acumen. It would have taken for the organisation to come together and appreciate that whether Steve needs 600 people… whether the pricing of the product you are selling allows for margin plus the cost to make it and serve it by Steve’s army… whether having a sales team commuting for 45 minutes per day to the Holiday Inn outside the airport on the outskirts of European capitals in the snow to save €100 per night… are all part of one conversation.

And you need to have this conversation constantly, consistently, transparently and, crucially, before it is urgent. Or you can have it with your back to the wall, being forced into cuts that you then regret.

Put that way, it feels like an obvious choice, doesn’t it? And let’s face it. Every year there are budget constraints. And every year ambition goes up.

Every year. Every company. Every continent.

Pleo’s report backs me up here. 40% say their budgets have decreased while 44% say their ambitions have increased. The need to keep an eye on cost will never go away. Either because times are hard or because our ambition is growing. Or both. And the pain of making decisions against the clock and with our backs to the wall will never get less. To avoid this pain, we need to not let it get to that.

To avoid regretting the decisions, we need to make better decisions. Or manage the situation so we don’t need to make them at all.

59% of us consider working with finance difficult but I would say about 100% of us consider working with someone like Steve a nightmare. And maybe, just maybe, having transparency around the numbers and the ability to holistically look at revenue and spend in the round for your company will allow you all to have objective proof for emotive conversations such as ‘what the hell, Steve?’

It will allow us to spare the 50% who regretted the cuts and protect the 85% who needed to make them in the first place.

If we get proactive enough in looking at revenue, spend and cost to serve as one set of numbers that interact with each other, as one conversation, we may get better at running our business. Better at working together. Better at our jobs. Even Steve.

#LedaWrites

Leda Glyptis is FinTech Futures’ resident thought provocateur – she leads, writes on, lives and breathes transformation and digital disruption.

She is a recovering banker, lapsed academic and long-term resident of the banking ecosystem. 

Leda is also a published author – her first book, Bankers Like Us: Dispatches from an Industry in Transition, is available to order here.

All opinions are her own. You can’t have them – but you are welcome to debate and comment!

Follow Leda on X @LedaGlyptis and LinkedIn.