Many many institutions large and small return from the summer break to a frantic quarter looking at the budget for the following year. Sometimes I am stunned at how unprepared departments and managers are for this annual event.
In most organisations, the budget and planning process follows the same cycle every year, and, typically, the period from August to November is the key time for decisions. I even used to joke, in my old role as a CIO, about what I did all year: I spent the first quarter hiring, getting people into the right projects and teams; the second justifying what they should have done; the third setting the budget and strategy, and the final quarter reviewing everyone, and finally enjoying the year end.
So if the process is the “same procedure as every year” (for my German readers I should add “same procedure as every year, Miss Sophie”….but I will leave the unititiated to work that out with a few web searches….). So, if it is so predictable, why do organisations always struggle with budget setting processes so much?
There are so many reasons we struggle with the process. The first is laziness – “they will just give me the same as last year” is all too often the expectation but it is certainly not the correct way. We should have to justify what we spend both on running and on investment; just assuming the same, is not managing, it is rolling over and ignoring the facts. The second excuse is priority – “it is more important to deliver what I am doing this year than worry about next”, true but a good manager will prioritise in a way that he balances the deliveries, and setting a strong, well thought out budget proposal, should have equal priority with any current year activities. The final one is time – “I dont have the time to budget and plan”; well, some of my previous blog articles
have dealt with the lack of time for planning. Overall, planning and strategy should be living processes in an organisation, they should be a constant and ongoing process, almost operational in nature but everytime we treat them like a new one-off project.
The more we have been working on our plans for Strategy4IT
we have been seeing that the whole process of continuous assessment can, and should be applied to the budget and strategy process. If you are constantly assessing where you are, and how you are performing against your targets; the budget process then becomes a series of questions about whether the business objectives and targets have changed, and whether this impacts the current strategy. Sadly, most organisations are not mature enough to have that continuous assessment processes in place, so every year they start to climb the mountain of “where are we now?” and “how are we actually doing against our objectives?”; before they can even start the questions “where would we like to be?” and “how do we get there?”. This inability to embed the first two questions into a regular process, means that the budget round, rather than focusing in the last two questions, is preceeded by a frantic struggle to find out the current state of play.
Sadly, this means time for strategy is minimised to the final scramble for money. Proper assessment of options in context of objectiove, and cost-benefit, is skimped upon, then the whole processes starts again the following year. Surely we should be building the assessment of where we are, and how we are doing against objectives, into the natural cycles of the organisation? This would mean that the strategy, budgeting and forecasting process would be built on firm foundations, and would have the time and focus it requires.
So, where are you? Do you scramble to design your strategy at budget time? Do you know how you are doing against your objectives?
Or, are you stuck in the “same procedure as every year” rut?
Is it time to break that cycle?