Fiscal Lifecycle

The first and most important lifecycle to examine is the fiscal cycle. Fiscal patterns are pretty much the same whether an organization is large or small, a for-profit or nonprofit , a publicly traded conglomerate or a privately held business, a government department or an educational institution. All organizations must pay taxes, prove their nonprofit status, or collect taxes, usually quarterly or annually.

All organizations have a fiscal year. In some organizations the fiscal year has the same dates as the calendar year. A new calendar year always starts on January 1, has 12 months, and always ends on December 31. A fiscal year also has 12 months, but it may begin on the first date of any month. It ends on the last day of the month that falls 12 months later. Many organizations align their fiscal years to begin and end on the same dates as the calendar year. Many others do not. Microsoft, for example, begins its fiscal year on July 1. The U.S. federal government begins its fiscal year on October 1.

Important ‚  

The legal requirement to pay taxes drives the managers in your organization into quarterly and annual behavior patterns. If managers are driven into predictable behavior patterns, what they pay attention to as being relevant to the urgent and important of today also follows a predictable pattern that you can use to get your value across.

The key to understanding fiscal context and the fiscal value lifecycle is knowing when an organization ‚ s fiscal year ends. In addition, you also need to know the beginning dates of each quarter within that year. A quarter is defined as three consecutive months within a fiscal year. For planning reasons, quarters are typically referred to as the first quarter, second quarter, third quarter, and fourth quarter (figure 11-1). If the fiscal year begins on July 1, then the first quarter consists of July, August, and September. The fourth quarter is April, May, and June.

Figure 11-1: Example of a fiscal year.

Finding a Fiscal Year

Finding the date when an organization ‚ s fiscal year begins is easy. If you are part of an organization, you are probably aware of your organization ‚ s fiscal year because you may have certain budgetary requirements (if you are a WLP manager) or it might just be in the jargon of the organization. If you don ‚ t know the fiscal year of an organization, you can go to the Website of most publicly traded organizations and find in their annual report when their fiscal year begins and ends. If you are dealing with a small or private organization, this is one of the first business intelligence questions you should ask in your networking or informational interviews.

Quarter by Quarter

Fiscal context may also be thought of in terms of the annual budget and planning cycle of an organization. Examine figure 11-2 to take a closer look at fiscal context.

Figure 11-2: The fiscal lifecycle.

Context begins in the fourth quarter with budgeting. The fourth quarter is an extremely important time of the year because that is when money is set aside for the most critical priorities in the next 12 months. If money is getting set aside, then this must be the time that you would want to propose your projects and communicate your value, right?

Important ‚  

You definitely want to be communicating your value during every quarter of the year, but the fourth quarter is not when you should propose new projects! Fourth quarter is a tactical time when all of the possible projects are already known. If you haven ‚ t made the consideration list before the fourth quarter starts, the odds are less likely that you ‚ ll get funding.

If you want funding for your projects, you need to have proposed them during the third quarter. The third quarter is the vision-setting and proposal-review period. This is when department heads form alliances with other department heads or work on strategies to protect or increase their allocations of money for next year. The third quarter is when managers spend significant time communicating up the chain about the value of what they have done and why they should be the ones to keep and grow their portion of the budget.

But, if you need to communicate your value and accomplishments by the third quarter, you need to have been gathering and summarizing data about your performance and validating your results before then. But, wait! You didn ‚ t have the money to implement new interventions until the beginning of the first quarter so there may not be a great deal of data about results until the second quarter. That ‚ s why figure 11-2 labels the first quarter as the implementation quarter and the second quarter as validation.

When Does the Real Work Get Done?

When examining the year this way, it may seem as though only half of the year is spent getting any real work done and the other half of the year is spent planning for the next year. Looking at the year this way does not mean that ongoing business operations stop for new initiatives, validation, visions , or budgets . It is a given that the ongoing work of the organization will continue to be managed every day.

The fiscal context in figure 11-2 is referring not only to the ongoing core of the business, but also to the extra initiatives and changes that are always required to keep the core of the business profitable, operational, and competitive. Remember that if ABC MediCompany did nothing each year to protect its 5.6 percent net profit margin, inflation alone would remove approximately 2 percent of the net profit. New initiatives, along with the core of the business, will always be there.

Important ‚  

To communicate value, you need to connect your value to the given core of the business, and you must make sure your contributions to the new initiatives that keep the business profitable, well positioned, and competitive are obvious every quarter. Contributions are most easily recognized when it is obvious how those contributions support the current urgent and important Senior, Mid, or 1st/Ops tasks within the implementation, validation, vision-setting, or budgeting activities.

Why Communicate Quarterly?

Notice in figure 11-2 that there is a line labeled Business Accountability under each of the quarters in a fiscal year. For publicly traded businesses, which must not only pay taxes but which must file SEC statements and announce earnings, tracking accountability every quarter is a legal requirement. To be able to make informed statements about their earnings, Senior managers require their Mid-level managers to report on the status of their operations each quarter. To get up-to-date information, Mid-level managers require status reports from 1st/Ops. To get their data, 1st/Ops ask for information from their Individual contributors. To be viewed as a true business partner, you need to be established as a team player who consistently contributes to this quarterly information-gathering cycle and who helps others to contribute to it as well.

When communicating value, it is inordinately time consuming to have to communicate to everyone at all times about your own value. In addition, there is always a bit of wariness when others listen to someone talk about him- or herself, especially if they seem to hear him or her do it all the time. The ideal way to communicate your value is to get others to do it for you.

It ‚ s one thing to say that you ‚ ve helped improve inventory turns by 5 percent, thereby saving hundreds of thousands of dollars in the first three months of implementation. It ‚ s even better when your inventory control manager publicly gives credit to the WLP department for improvements in inventory turns. Your communication strategy needs to be timed such that you have information about how you have supported the urgent and important (such as the implementation of a new initiative) in the hands of each of your audiences as they are gathering the information for their status updates. When it comes to relevance, give them news they can use at the right time. When done in an inclusive way, this news not only makes you look good, but also it helps the Senior, Mid, 1st/Ops, and Individuals you are communicating with look good too. That ‚ s news they ‚ ll want to share, every quarter!

If you are managing a department, having your people cited by a number of managers in different departments leaves a powerful impression . If you are an external vendor, you know the power of word-of-mouth advertising. The key to your communication plan is making sure succinct summaries of your value are in the hands of the right audience at the right time each quarter. It ‚ s the equivalent of a regular WLP press release. You won ‚ t always be cited by everyone, but just as consistent discipline pays off when creating and updating baselines, consistent discipline in communicating within context pays off.

As you demonstrate your value within the fiscal context, it becomes easier to arrange meetings with your managers to ask them what they would value for the future so that they can meet their fiscal obligations in the next one, two, or three quarters. At these meetings, you can discuss your proposals, ask for specific types of help, and agree upon the dates when you will provide status updates. These dates should be close to the time when they will need to be making their quarterly status reports. Gradually, you should be able to get your managers to expect communication from you that they can use to talk about successes in their own departments. You should also be able to get them on a schedule to discuss the future and arrange for periodic updates from your agreements.

Variations on Fiscal Context

Some companies may find themselves in a more rapid budgetary cycle. Many high-technology companies, for example, find that their markets move so quickly that a yearlong planning cycle is far too long to react to swift market changes. Such companies often go through a budget adjustment process at the half (end of the second quarter). Others use a quarterly budget reallocation process.

What do these terms mean? It means that value communication is constant and that high-quality data showing progress toward goals is an imperative or you will quickly be ‚“outta there! ‚½ When fiscal planning cycles are cut in half from annual to twice or four times a year, your communication context must adjust accordingly .

Of course, not all organizations operate on such a strict timeline. The smaller the organization, the less complex the budget planning process becomes and the easier it is for a single manager to make decisions and commitments. Smaller organizations can sometimes be driven more by other value lifecycles.

The fiscal context lifecycle is the most important one to get into the rhythm of whether you are internal or external to your target organization. The other two lifecycles are synchronized to work within the fiscal context lifecycle.