Cutbacks vs. PerformanceStat: What's the Conflict? Financial Deficits and Attention

Abstract

Reductions in any organization’s financial budget can cause reductions in the organization’s performance (its outputs and outcomes). It is not obvious, however, that the primary cause will be direct: Less money to spend means less can be done. Instead, the bigger impact may come through the opportunity costs created by the financial cuts on the time budget of the members of the leadership team. For the attention that they must pay to any budget reductions automatically reduces the attention that they can devote performance improvements — and to everything else. It isn’t the financial cuts themselves. Rather, it is that the deficit in the financial budget creates a deficit in the leadership team’s time budget. The funding deficit in the financial budget imposes an attention deficit in the time budget.