Stop Budgeting Start Improving

An interesting article has appeared in the Harvard Business Review regarding budgeting. The tenet of the article is that you should abandon budgeting as a management process and instead focus upon driving inefficiency out of the cost drivers to the business.

The citation for this notion is that Management spend far too much time collating, discussing and disseminating budgetary information across the organisation; the article gives examples of large organisations that have relinquished the budgetary process and adopted the aforementioned principle.

I’ve been pondering this notion around in my head for some time and can see where the author is coming from but I’m not entirely convinced that I would want to let go of my numbers as they are the ones that have established my KPI’s; it’s my KPI’s that I manage surely, not my budget?

I do believe however that there is a lot to commend this principle if the Management Team have the ability to understand the structural and operational cost drivers but at some point someone must establish what they are from a zero base and once having done that, then to move forward to managing them, but have we not just come full circle in our logic?

Perhaps what should actually be said is “establish the budgets once and then manage them by spending the time on driving the inefficiency out of the operational cost drivers”

I’d be interested in your thoughts – drop a line or call; always welcome.

About Michael Carr

Specialising in Strategy, Systems and Organisational Design I've had a varied and rewarding career and been fortunate to work for some superb companies such as Courtaulds, Unipart International, Akzo Nobel and more recently Jaguar Landrover, all luminaries of a solid, disciplined and a conservative, though never lacking in innovation, approach to business management and development. Augmenting my career with studying for my MBA at Warwick in the early 90's has given me a balanced and I believe rich resource set to draw upon in my Consultancy Practice. My Clients have been good to me, tolerating my idiosyncrasies, giving me enough rope to go along the journey that I was taking them and hopefully in return I've been able to repay them by raising the bar and their business performance, giving them the results and achievements they were looking for. I really enjoy my work and love the challenge - isn't that what it's all about?
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