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Press Releases & Articles
March 2008
Break Out of the Risk-Adverse Budgeting Trap
by Martin R. Baird
(Print,
PDF)
I have a serious question for all casino chief executive officers
and general managers. Do your department heads do risk-adverse
budgeting?
No, this is not some new trend. Unfortunately, risk-adverse
budgeting has been going on for far too long in my opinion. Casino
managers often draft budgets that are pretty much a mirror image of
their previous year’s budget. Or they work up numbers that they know
will be easily approved. Instead of asking for funds to do what is
needed to create greatness for the casino’s owners, employees and
guests, they go for what is easy. They settle for that which has
little or no risk. That’s risk-adverse budgeting.
But budgets provide the perfect opportunity to take risks. When I
was first out of school, the creative director of the ad agency I
worked for always said we weren’t doing our jobs if clients liked
every concept we presented. In other words, we weren’t needed if we
couldn’t come up with ideas that had not occurred to our clients.
The key here is that casino department heads need to stretch the
boundaries. You may guide them back in, but at least they are
thinking and proposing new ideas. They need to extend their vision
for the future and put their money behind their ideas. If they know
that a 3 percent budget increase will be accepted without question,
they shouldn’t use that as a stop sign. They should see it as a
guide post. Their job is to see beyond what the others on their team
already see for their department. If they are not testing the
boundaries of their department, who will?
Please understand that I’m not suggesting you take unproven risks
that have little chance of paying off. But taking calculated risks
is important if you want to be ahead of the competition.
Risk-adverse budgeting never created an industry or market leader!
Here is a quick non-gaming, real-world example. Recently while I was
at home, I received two telemarketing calls from people doing
research. With expertise in the area of research as it relates to my
company’s Advocate Index™, I’m always interested in what other
companies and industries are doing. As I have mentioned before, I
enjoy looking for new ideas and concepts outside the walls of
gaming.
The first call was from a company that was doing research regarding
some ballot measures and voter interest. I decided to see what they
were up to. Immediately, there was a problem – or it should have
been a problem These were Arizona ballot measures and I reside in
Maryland.. When I mentioned that to the researcher, he said, “That’s
OK if you’ll answer the questions.”
I figured if he wanted my opinion, I would share freely. The
majority of the questions were about raising taxes. I consistently
answered that I was opposed to raising taxes. Near the end of the
survey, I was asked if the measures passed would I want the money
spent on children or soldiers coming back from war. Now there really
was a problem. I couldn’t answer because I had consistently said I
would not vote for the measures. And I could see the Arizona news
headlines later – 67 percent of people surveyed said they would
support more funding for children over war vets. Talk about
misleading!
What does this have to do with budgeting? Obviously, someone hired
this research firm on price alone. Anyone who would allow a person
from a different state to answer these questions must have come
rock-bottom cheap.
Two days later, the next telemarketing call came and this one was
from The Gallup Organization. Gallup wanted to ask me about my most
recent experience with my bank. The person who called stated his
name, the name of the research company and what he wanted to know
about. He also set the expectation that the survey would take five
to seven minutes. He confirmed that I did indeed bank with the
financial institution in question and that I had had a recent
transaction. Then he asked if I or anyone in my family worked for
the bank. What a great idea! They weren’t interested in what the
husband of an XYZ Bank vice president thought about the bank’s
service. The first researcher who called could have cared less that
I lived in the wrong state.
I’ll guess that the fine folks at Gallup are not the cheapest on the
block. But based on the short interaction I had with Gallup, I would
be much more likely to invest time and money into the results they
provide me.
I’m sharing all this because I think when we are risk adverse and
let the budget drive our decisions, we often do what is cheap versus
what is best. I’m amazed at the number of proposal requests my
company receives that lead off with questions about the cost and
possible discounts. They don’t ask if my company’s expertise can
help them make more money.
Budgets are critical to all businesses. What I’m hoping for is that
more time is spent looking at what each line-item investment will
generate in revenue and savings. Each budget item has a cost but it
also could have an amazing benefit. When cost is the driving force,
you are doing risk-adverse budgeting. Can your casino’s departments
afford that?
Martin R. Baird is author of “Advocate Index™: An Operational Tool”
and chief executive officer of Robinson & Associates, Inc., a
customer service consulting firm for the gaming industry. Robinson &
Associates helps casinos determine their Advocate Index, a number
that indicates the extent to which properties have guests who are
willing to be advocates, and then implements its Advocate
Development System to help casinos create more guest advocates. The
Advocate Development System uses the proven methodology of Advocate
Index in combination with best business practices to chart a course
for growth and profitability. More information about the Advocate
Development System and Robinson and Associates is available at the
company’s Web sites at www.advocatedevelopmentsystem.com and
www.casinocustomerservice.com. A copy of “Advocate Index: An
Operational Tool” may be obtained by calling 206-774-8856. Robinson
& Associates may be reached by phone at 480-991-6420 or by e-mail at
mbaird@casinocustomerservice.com. Based in Annapolis, Maryland,
Robinson & Associates is a member of the Casino Management
Association and an associate member of the National Indian Gaming
Association.
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