How Corporate Spending affects negatively your Corporate Planning.

During the past 12 months the global companies (read decision makers) negotiated with in regards to supporting them with essential economic data reports clearly were divided in two groups:

One group fully agreed making changes in the cost structure is needed at all means. Not only restructuring the work force or shutting down plants but also saving costs coming from non core business activities.

The other group in contrast was very determined in not spending at all but only in the core business. No chance of smarter or better spending when it comes to external intelligence, no need for additional economic data despite the worst economic crisis in their job history and certainly not willing to even look at the proposal.

When it comes to Corporate Spending is a negative impact on Corporate Planning justified? Can it easy be eliminated or limited?

My main focus will be on the second group. Not only because I disagree with their spending rituals but because I simply do not understand in this climate there is no need for better economic data combined with cost/time savings.

Current market shifts are caused by changes in the local economies and when these recover more market opportunities will occur. This will go slowly and not by one region.

When China improves the immediate affect on Korea or Malaysia will be smaller. The same for Brazil for example while recoveries from the US and Euro zone remain uncertain.

It all needs time and during this period every minute or dollar spent on non core business issues is a direct extra cost. This is not different per sector or industry.

The global crisis is not caused because of one industry. Housing and finance are related but cannot be marked as one industry. Economic data is essential in every market.

To be prepared or in better shape for potential market recovery most attention is paid to the largest efforts of cutting costs; laying of 5, 10 or even 20% of the staff, cutting salaries of executives or shutting down plants abroad. This will save millions and people actually get rewarded for it.

The irony is that when recovery takes place the staff is hired again and plants are re-opened or re-built but that is the way it is.

But what is wrong with a cost cut of 10, 30 or even 100K?

The past 12 month is noticed group two is not interested. Especially when this is regarding non core business information there is no interest as it is not seen as part of the core Corporate Strategy or Planning.

The majority is not prepared to listen or consider a change here as a contribution. Instead they continue wasting corporate time and expenses on non core business information such as economic information.

The contradiction here is that for group two good or bad times do not matter. They do not care who provides them the forecasts or costs involved. They even prefer a well known brand to “blame” for wrong established analyzes.

But they forget hidden costs like non core business spending finally reduce budgets more resulting smaller budgets. Where remain benefits?

People can only spend once in terms of time and expenses. When a too large part is not related to own business it will have a negative effect on the total.

This total includes all budgeting and corporate planning. While those who are in charge of the larger restructurings clean up the next 12 months hidden costs remain untouched.

Why?

An easy calculation concludes that in every organization operating in other international markets 10% spends corporate time and expenses on non core business information such as macroeconomics.

This 10% contain professionals linked to for example corporate / regional / country departments such as Finance, Marketing, Business Development, Country Management, Strategic Planning etc where macroeconomic data is used to complete market insights.

Per person a cost calculation will result in an annual extra non core expense of at least 1,000 dollars based on one hour per week with an average hourly salary of US$ 30.

Just multiply that with the 10% of your work force. Is that a not relevant or can be missed under the new corporate objectives?

Often current external provision is not under revision which leaves costs unchanged which is a missed opportunity. Lack of interests or lack of decision making power?

The same professionals claim not to be able to work without certain global providers of information (business / market intelligence) but are they right?

Should they not instead to complete the new program of Corporate Strategy and Planning, which is adjusted to this cost driven climate, not look for better and more efficient tools?

According to group two this is again not necessary. Conclusion;

New Corporate Planning requires new settings but this cannot only be focused on core business expenses.

When business leaders complain about the market conditions every dime saved should be embraced.

Business leaders should not hide behind the new Corporate Planning, even though this indicates more savings than spending.

All what can positively affect the corporation should be explored and welcomed; even if this is only 10K instead of 1000K.

When a service can cut down 80-90% of non core business costs of similar information and help professionals prepare for a new era of corporate growth, should that be ignored?

Group two screams about the worst performance in decades but only looks at the big and easy numbers. Their non core business spending will therefore remain inefficient in terms of costs and corporate time.

While this looks like a small issue it will finally slow down the whole corporate processing and directly Corporate Planning.

Helping improving the non core business part by spending smarter resulting from the first month in more time and assets available to core business should be welcomed.

Otherwise Corporate Spending will affect negatively Corporate Planning.