The Fiscal Calendar Effect

Sep 01, 2010 by Jim Harris in Data Governance, Data Quality

Since today is September 1, I decided to revisit my previous blog post
Eternal September and Tacit Knowledge (ironically published in February), which was about the need to formalize your organization’s explicit knowledge as well as the more complex challenge of finding ways to share your organization’s tacit knowledge — the collective wisdom of employee experience.

The common effect of Eternal September is so-named because September is the beginning of the academic year for most colleges and universities, marking the arrival of new freshmen (i.e., first-year students) requiring orientation.

Therefore, Eternal September is just one of many calendar effects, which are changes in behavior that appear to be related to changes on the calendar. 

Calendar effects are sometimes referred to as seasonal tendencies. Although they can have other contexts, they are mostly discussed in an economic context, such as their effects on stock markets and retail prices.

For the purposes of this blog post, I want to focus on the Fiscal Calendar Effect. Specifically, how it affects enterprise information initiatives.

The Fiscal Calendar Effect

In the United States, the fiscal year is divided into four fiscal quarters which, most commonly, are aligned with the calendar year.  In other words:

• Q1 = January – March
• Q2 = April – June
• Q3 = July – September
• Q4 = October – December

And in the United States, the vast majority of organizations, both public and private, are extremely fiscal quarter-oriented in their planning and execution.

The Business and Society Program at the Aspen Institute, which I first read about in the book Switch by Chip Heath and Dan Heath, is committed to fighting what it refers to as “short-termism” in the business world, where organizations with a short-term focus can’t afford to tackle long-term problems.

As the CEO of a huge financial services firm was anonymously quoted, while pointing to the 90-day calendar posted on his wall: “That is my reality.”

No one is trying to demonize executive management. The fact is that although most executives would probably prefer, all things being equal, to have a longer-term focus, the culture of the stock market encourages short-term thinking.

The limited planning and execution stranglehold of fiscal quarter orientation, especially within publicly traded companies, is the practice – not required by any law – of what the Heaths refer to as “the bizarre Kabuki dance of earnings guidance.”

Each fiscal quarter, “a public company sets expectations for the earnings per share it will deliver in its next quarterly financial report. Then, when the company files its report, a miracle occurs — the company announces that it beat the expectations!”

This Kabuki dance creates the Fiscal Calendar Effect, which often creates dead zones in the planning and execution of enterprise information initiatives.

In other words, after the planning and earnings guidance for the next fiscal quarter has been finalized, if your project — or  the next phase of your program – didn’t make the cut, then you know that for the next 90 days no substantial progress can be made. 

Additionally, the Fiscal Calendar Effect can alter the priorities of approved projects and program phases.  If the quarterly financial report is not forecasted to be positive, then previously approved efforts for the current quarter can be abruptly halted — and not necessarily deferred to the next fiscal quarter.

How does the fiscal calendar affect your organization?

Enterprise information initiatives are very sensitive to disruptions in their momentum. 

The morale of the employees working on these initiatives can be negatively affected, especially when not provided with insight into why these disruptions occur.

Additionally, the enterprise-wide collaboration required by these initiatives is often difficult enough to initiate.  So when the next phase is delayed, deferred or even canceled, it can send the signal that the collaboration wasn’t worth the effort.

This effect can be quite similar to when employees working for a public company read the press releases about the great year the organization has been having financially, but then learn that their year-end bonuses are being reduced, deferred or eliminated.

Although I understand that honest feedback on this question is probably classified as MGMF (“might get me fired”), how does the Fiscal Calendar Effect affect the planning and execution of enterprise information initiatives at your organization?

Tags: Data Governance, Data Quality