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| 82.
Set The Organization's Capacity At 80%
| Many CEOs and top managers either formally or informally set their organization's workload at 100% plus. While the reason for their zeal is usually based on an inherent lack of trust in the work ethic of their employees, the reasons don't matter. What does matter is that when expectations are set unreasonably high the results will most likely be unattainable. And the unintended consequence of this approach is to guarantee shortfalls to the budget and plan at the bottom line while expense budgets are almost always met -- an interesting irony.
Managers who trust their people realistically set capacity at 80%, providing the organization slack so that when unexpected crises or opportunities occur (and they always will) the organization can capitalize on the opportunity or challenge without missing a beat.
Companies that set realistic expectations consistently make plan year after year and are highly profitable. Why? Because when expectations are met, all budgets are achieved including sales and profit budgets. Interestingly, capital budgets and capital budget projects that follow the 80% capacity planning rule will also make plan.
Setting the organization capacity at 80% places trust in the organization's ability to deliver and avoids setting management up for failure.
Unrealistic expectations result in unattainable goals. |
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