This morning as I read the New York Times and a headline caught my attention, “For Homeland Security Nominee, Good Leadership Is in the Details”. The opening paragraph read as follows:

PHOENIX — Janet Napolitano, the Arizona governor and nominee to head the Department of Homeland Security, has been busy the past few weeks with a painstaking review of … the department’s budget.

“She will tell you understanding the budget is understanding the policy directives of any organization,” said Jan Lesher, her chief of staff who, like several aides, is preparing to join Ms. Napolitano in Washington if, as expected, she is confirmed after a Senate hearing on Thursday.

Brilliant, an absolutely brilliant statement. It reminded me of so many stories of frustration both when I worked for corporations directly and then consulted to them. Ms. Napolitano’s modus operandi is certainly not new but few embrace it.

It reminded me of a situation when I was working for Bristol-Myers in the early 1980s, now Bristol-Myers Squibb. An industry study found its way to the chairman illustrating that Bristol-Myers spend more on new consumer products than any of its peer companies and had the lowest success rate. Needless to say, senior management was not pleased. What did they do, formed a task force of course. Being responsible for new products at the Drackett Company (their household products arm) I found myself on the task force.

Like most diligent employees conscripted to a task force we had long meetings, lots of fact-finding and detailed analysis of budgets and behavior over a five-year period. When we met with management to share our conclusions none of the members of the task force really wanted to speak up. Being too young, too dumb and too ambitious, a terrible combination, I finally spoke up. Gentleman I said, “Bristol-Myers does not want new products or have the stomach for the inherent risks that come from introducing new products. We sure go through the motions but stop well short of getting to the marketplace.” Not exactly the conclusion senior management was looking for.

What we learned was that the people who worked in new products, the innovators, creators and change agents either wanted out of the new products department or the company. The finding was that no one, not one person, had ever been promoted out of new products. All promotions and the higher salary levels went to people who were lucky enough to be assigned to the largest divisional brands. It had nothing to do with how or whether they had grown their brand but everything to do with maintaining their brand, minimizing risk and maintaining the status quo. They were evaluated on whether they made their number. The number which by the way they set and was a sales number not a profit number. Oh, and this magic number that was never intended to be significantly higher than the prior year. Predictability is far more important than innovation. Why would anyone want to work in new products? Fortunately much of this thinking has changed but it has taken far too long.

The other thing we found was that new product P&L’s were compared to those of established brands. For example, Windex and Drano were longtime leading brands at the Drackett Company. The amount of marketing support because of their number one category position was significantly lower than any new brand needed to be. Yet these comparisons on marketing support, cost of goods, you name it where the benchmarks for new products and benchmarks no new product could meet. I am sure you can understand why there were no new products.

Jumping a decade or so to when I left corporate life to begin consulting this lesson of looking at the budget was reinforced. I cannot tell you how many times a client would say, “I would love to do this but I do not have the budget.” The translation, “I really do not want to do it, it just seems too risky and all my funds are committed to doing all the stuff that is not working anyway.” Denis Healey is credited with one of the great quotes “it is a good thing to follow the First Law of Holes: if you are in one, stop digging.”

The hardest thing for most corporate managers to do is to stop doing something. An exercise that we used to take clients through was to make lists of every activity on every line in the budget. These were both direct and indirect costs. For example what is the cost of hiring a person to do something that does not need to be done? For each item they were required to put a number between 1 and 10. 1 meant not at all important or critical and 10 meant absolutely critical to the business. From this exercise it always became clear that two thirds of the things in the budget, two thirds of their activities were not directly impacting the growth of the business.

With this learning in hand we could then take them through a stop, keep, start doing exercise. Let us take the things that we believe we need to start doing and eliminate those things that are not impacting the growth of the business going forward. It is absolutely amazing how much money turns up. It is actually amazing how many activities are being perpetuated because no one has the determination to just say stop doing that. It may have been a good idea at one point but its usefulness has long passed. Think about what you could stop doing and how much time and money that would turn up for new ideas, innovation and a more rewarding work experience.