VOL. 128 | NO. 180 | Monday, September 16, 2013
Smart Stuff 4 Work
Thoughts on Budget Season
By Chris Crouch
For many of you, it’s that time of year again. It’s the season to complete your budgets. So, what’s the deal with budgets? Is all this budgeting activity worthwhile or not? I honestly don't know. Perhaps the most accurate answer is, maybe.
I can understand the need for budgeting more than the need for a budget. In a nutshell, a budget is often just a plan that focuses on money coming in and going out of a business. If so, that’s not enough. I agree with Eisenhower who said, “In preparing for battle I have always found plans are useless, but planning is indispensable.” Like Ike, I think the thinking related to putting together a budget is more valuable than the actual budget.
A budget can also be thought of as a strategy. With regard to that, we can draw on the wisdom of Mike Tyson who when asked about his boxing opponents’ strategies said, “They all have a strategy, until they get hit.” Considering the volatility of the current economy, you might want to pay attention to Mike.
Let’s talk about the budgeting process from a leadership point of view. When you see the end result of all this budgeting activity, what kind of questions should you think of, or what kind of budgeting pitfalls should you try to avoid?
For example, is the budget focused on the right things? Often budgets present only hopeful totals in terms of revenues and expenses. For example, your sales group may budget $1 million, $10 million or $100 million in sales for the next year. Those may be great revenue goals for your business. However, keep in mind that you cannot do a goal. I’ll bet Eisenhower would like to know more about the various thought processes that supported the sales goal. For example, what is your budget for total number of sales calls to produce the sales revenue total? What is your budget for successful calls and what is your budget for “dry holes?” In other words, only budgeting the total dollars is not enough.
Other questions: If financial incentives are tied closely to the budgets, what is the potential for manipulation in favor of individual incentive payouts, but detrimental to overall company profits? Will budget pressures pit one department against another, or encourage them to work together for the benefit of the company and clients? Do budgets allow for present spending that has the potential to penalize current results, but improve future results (such as investing in equipment that will pay off handsomely in the future)? Will the budgets allow you to hire a superior performer if they unexpectedly become available?
That brings up an important overall point with regard to budgets. Does your budgeting process encourage managers to use the phrase, “It’s not in the budget” as an excuse for not seriously considering the ideas of people who have a legitimate reason for requesting budget exceptions?
I’m not really for or against budgets. I just encourage you to think about them carefully.
Chris Crouch is CEO of DME Training and Consulting and author of several books on improving productivity. Contact him through www.dmetraining.com.