Leaders: be mindful of Parkinson’s law

 “Work expands so as to fill the time available for its completion” - C. Northcote Parkinson.

This is not a physics law, or chemistry law. This is a human nature law.

Parkinson’s law basically says that if you give a task to someone with a timeframe, the task will take them exactly that timeframe. Now, correcting for outliers, this law is a handy one.

It makes sense that teams stretch tasks or goals like this. Teams are already working on their day-to-day tasks, have new tasks coming their way, and have deadlines and deliveries. They will distribute and schedule their workload accordingly, which is the responsible thing to do.

Now, the big issue with Parkinson’s law is that it can extend into budgets.

Dangerous.

If you tell department heads that they will get a 20% increase on next year’s budget as compared to current year’s budget, they will use it. This does not necessarily mean they are big spenders or like to pad their budgets (two big ‘no-no’s in startups). This can mean that they had been waiting for funds to implement a project.

You might be wondering: if the company is growing by 20% wouldn’t this make sense?

The answer --most of the time- is no (remember this?).

The big mishap in startups is assuming costs have a perfectly linear relationship to revenues, i.e. the increase at the same rate as revenues.

Unless a machine, a department, or the company is at capacity already (a best practice is to start monitoring capacity at 60%-80%), budgets should not be increased linearly to growth, as they will be immediately used. Mind you: this doesn’t mean they shouldn’t be increased.

More importantly, without the proper controls, Parkinson’s law can make your spend expand to the size of your cash position.

Ouch.