Why Budgeting Kills Your Company — HBS Working Knowledge A very insightful article that makes you ask some interesting questions while your ogranization embarks on a budgeting cycle, which my bank is undertaking right now.
I have always wondered why companies spend months planning for a year, while I was consulting with HP as a manager in Capgemini… HP business managers used to dread and prepare months in advance for their annual budgeting process, which was a haggling activity. The article above states how that is such an inefficient way of doing budgeting.
Based on the above article I came with 6 questions that all leader of organizations need to ask…
1. Are we pushing business units to a fixed-performance contracts, which always results in under performance?
2. Are we ensuring that each business unit is developing its goals based on longer-term external benchmarks instead of internally negotiated annual targets?
3. Have we set expectation on evaluation and rewards based on relative-improvement contracts instead of some archaic targets?
4. Do we have a continuous and inclusive action planning rather than a one time budgeting activity?
5. Do we have the discipline of making resources available on an as needed basis instead of allocating it in advance?
6. Do we have a focus and discipline of using budgeting to enable strategic alignment?