Resource Allocation

Challenge

One of a CEO’s most challenging tasks is allocating resources to maximize returns. Often, this involves a series of closed-door, one-on-one meetings where executives pitch their investment requests, sometimes at the expense of others. It inevitably falls on the CEO to make the difficult calls on where investment dollars go and where the budget axe will fall.

In the name of “fairness,” a CEO may simply declare an across-the-board percentage increase or decrease. This easy solution virtually guarantees a suboptimal outcome.

We’ve developed a better process for optimizing resource allocation, introducing both transparency and a genuinely fair process.

How Strategic Offsites Can Help

One tool we use for resource allocation discussions is our "poker chip exercise." To begin, each potential spending item is detailed on a standardized template distributed before the first meeting. This helps ensure a common understanding of each item among the participants.

There are no closed-door conversations here; everyone on your team shares their rationale with the group.

At the offsite, we set up a roulette-style board and give everyone a pre-set number of poker chips. Attendees have an opportunity to ask questions based on their reading of the information contained in the templates. Once everyone understands each spending item, your executives “place their chips” to indicate how much each investment and business function should receive (see diagram below).

There are no closed-door conversations here; everyone on your team openly shares their preferences with the group. We then focus the discussion on those areas of disagreement or those on which the CEO requests to spend time, seeking to understand the rationale behind participants’ preferences.

Often, we run several rounds of chip placement, resulting in increased alignment once the group hears each other’s thinking. “Centers of gravity” emerge – investment areas that gain lots of energy from the group. If differences of opinion remain it may still come down to the CEO’s decision, but in this case that decision is based on an open, public airing of the case for and against different levels of investment.

The poker chip exercise is one of many tools in our toolbox. Regardless of which ones we use, replacing one-to-one lobbying for resources with open, informed conversations leads to optimized resource allocation decisions and higher levels of organizational buy-in.