This paper shows the reason why the budgeting process isn’t always the best answer, for those cases where the goal may be jeopardized. It is also shown a relationship between productivity and the performance “angle” of the system.

1. Budgeting? No room in the TBLS
strategy.
Ricardo Anselmo de Castro
ricardo.anselmo.castro@tecnico.ulisboa.pt
Abstract
This paper shows the reason why the budgeting
process isn’t always the best answer, for those
cases where the goal may be jeopardized. It is also
shown a relationship between productivity and the
performance “angle” of the system.
Key-words: TBLS, budgeting, leverage point
The budgeting process adds value to the business if
and only if two conditions are met:
1. the uncontrollable variability that is coming
out of the system is reasonably moderate.
2. there’s a good understanding of the
controllable factors that influence costs and
revenues.
Let’s go to the extremes: if there’s no variability the
budgeting process is not necessary – deterministic
world. On the other hand, if there’s strong
variability, budget won’t fit for business needs in
the same way that a broken compass can’t point us
out where the north is. When there are major
unforeseen events, budget itself is long gone and
any comparison to the current conditions is pure
waste of time. In respect to the second point, if we
don’t understand what the business major
controllable factors are we’ll certainly end up
playing with numbers. Inductive reasoning could be
one of those scenarios, which is always dangerous.
For instance: if there was a 2% growth in the last
three years, let’s put the same value for this year.
This may be a faulty analysis and won’t allow the
system to achieve what could be truly achieved. In
deep contrast, we must observe business’
environment, establishing causalities and stretched
goals. Maybe this is one of the reasons why Welch
prefers to talk in action plan, rather than budget.
In the TBLS strategy context (or in any continuous
improvement strategy) it’s not possible to guarantee
how much money the company will generate, prior
to project execution. Thus, since we cannot comply
with point 2 it’s not possible to elaborate a budget
that will bring some value to the table. Put it in
other words: an implicit objective of any
improvement project is to understand how business
works, and without that knowledge we cannot meet
point 2. It’s not that the TBLS department is
perceived as the company’s orphan child for not
having a budgeting process. It’s just that previous
conditions cannot be met in a way so that budget
becomes an asset.
In the TBLS strategy we know that the goal is to
improve the constraint to the extent that it will jump
to some other department or to the market. This
implies that some kind of breakthrough was
accomplished. Establishing aggressive goals for
elected projects is what matters, because there’s a
relationship to system’s performance. This way of
thinking avoids a budgeting process where people
are playing numbers to meet next year. In fact, it’s
pretty silly to develop a budgeting process like: if
the continuous improvement workforce costs are
ten, then the throughput must be three times higher.
This blind decision seems to be aiming at somewhat
arbitrary quota. Productivities of five times or ten
times are believed to be impossible and
consequently are not reinforced. Moreover, defining
targets without understanding the surroundings may
lead to wrong behaviours and jeopardizing the goal.
For similar reasons other local metrics such as
«number of finished projects» or «number of
trainees in TBLS» should be completely eradicated.
The truth is that there will always be a sense of fear
that the initiative is not paying itself. The necessity
of measuring its performance will naturally emerge.
This is ok, but again, I claim that the act of
measuring should be done not in a budgeting format
(a priori), but rather during/ after project (a
posteriori). If you will, project budgeting exists
every time one is developing a project charter, but
not before. One should not forget that the leverage
point – the local where projects are taking place –
prior to project
there’s a weak
understanding of
what factors
influence the
costs/revenues of
the business.
the outside
variability (not
controllable) is too
high.
the budgeting process
becomes a broken
compass.

2. enables to generate money in a much higher order
of magnitude than the incurred efforts (TBLS
operational expenses). This is the reason why it is
so important to identify the constraint.
The TBLS strategy creates a curious parallelism
between productivity’s initiative and the tangent’s
angle, by using a simple trigonometry concept:
Productivity is simply the ratio of two
distances: 1) projects’ throughput and 2) TBLS
department OVERALL operational expenses. This
ratio can be converted into an angle. In the example
above the angle is 45 degrees because both
distances are equal. The higher the angle the higher
the ratio is. But contrary to productivity itself, the
angle is not linear: jumping from 2 to 4 or 8 to 10 in
productivity will not produce the same difference in
angles. This shows that, to a certain extent, a higher
productivity is more difficult to obtain.
Angle = tan-1
(productivity)
The figure above shows some reference points. Up
to 63 degrees the owner of the system won’t be
happy, to say the least. Even with productivity = 4
people may not truly feel big improvements in their
bones, which can put the initiative at risk. The
efforts to maintain this type of improvement
programs are considerable and it’s possible that
during any leadership team transition the program
faces a dead end. In contrast, the TBLS strategy
claims that it’s totally possible to reach returns of
two digits. In this scenario, high performances will
be easily perceived, generating a self-momentum
towards a never-ending cycle.
CONCLUSION
The north of TBLS is in the constraint of the system
and in the projects that will make it move to some
other place. The budgeting process creates value if
two conditions previously mentioned are met. This
paper shows that condition 2 is inherently not
present in a continuous improvement department
(and very likely in other departments as well). The
focus is not in the budgeting process, but in the
improvements that will enable the constraint to
shift. No budgeting is what enables us to establish
aggressive goals, based on causality reasoning and
the context itself. This will also prevent some
feelings of injustice or playing with numbers.
Finally, the need for measuring the initiative’s
performance is still there. It’s just that the results
are measured a posteriori instead.
Referências
[1] Castro, Ricardo A. (2014) O Proveito da
Dúvida – troque o peixe pela cana de pesca.
Leanpub.
Productivity
< 1
1
2
4
14
20

Angle
< 45º
45º
63º
76º
86º
87º
90º
Statements
It’s best not having a continuous improvement program
To be or not to be: that is the question
Threshold “relief”
Wordclass continuous improvement programs
TBLS business strategy
First year in a very well succeeded startup
Heaven
Operational
Expenses
Throughput
45º
Throughput
OE
Prod =