Stop Playing the Budget Game and Teach Collaborative Budgeting

Stop Playing the Budget Game

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Retire top-down budgeting;

Develop a collaborative Business Roadmap

 

What

There are two players in the top-down budgeting game: executive and middle managers. Executives demand unrealistic sales, cost reductions, and profitability. Middle managers pad their needs to compensate.

A collaborative Business Roadmap Process is more flexible, direction-setting and seeks input from everyone. Each team submits their priorities for improvements. The process is project and outcome driven.

Why

Each party in the top-down budgeting game knows the other is often exaggerating their proposed positions.  Now time-wasting negotiations commence.

A collaborative Business Roadmap is a result of input from everyone and a compromise of priorities in the best interest of customers, associates and the company.   All employees have practical suggestions for projects and what they need to do their jobs for the coming year.  Teams decide on their priorities among themselves. Rather than executives making across-the-board percentage cuts reducing everyone’s ability to function at an optimal level some projects are abandoned, leaving those which are selected to be fully funded.

Employees gain understanding about the financial side of business through discussions with their teams in prioritizing their wants and needs for the roadmap.

Gain direction, alignment and commitment (DAC) of the entire organization.

How

1. Focus on the number of customers, products, projects or actions to those that will make a real difference in the overall profitability of the company.

2. All input is based on the best estimates and not from a position of negotiation.

3. Bonus system is not based on the budget which avoids building conflict into the process.

4. Business Roadmap Process Outline

a. Determine Direction

i. Business Strategy Meeting

– Short-Term Direction

– Long-Term Vision

ii. All Departments Team Meetings

– Ideas for Process Improvements

– What does it take: People, Projects & Capital Expenditures?

– Expected results—What is the expected return for company and customers?

b. Gain Alignment

i. Global Leadership Meeting

– Global Economic Forecast Review

– Present and discuss results from Process Team Meetings

– Time to connect and collaborate

ii. Business Strategy Meeting

From a company-wide, global and long-term perspective, evaluate the financial impact of the input from the roadmap process, ensure alignment with long-term vision and agree on the extent to which the company can fund the requested:

– Capital Expenditures & Significant Discretionary Spending

– Proposed Goals

– Proposed Projects

– Manpower Changes

c. Gain Commitment

i. Business Strategy & Leadership Team Meeting

– Discuss and agree upon the final Roadmap

ii. All Employee Kick-Off Meetings

– Present Roadmap

iii. Team Meetings

– Managers review with their teams the final goals and specific projects.

d. Final Business Roadmap Includes:

i. Assumptions

ii. Economic Perspective

iii. Focus, Products & Markets

iv. Capital Expenditures, Projects & Discretionary Spending

v. Manpower required

vi. Financials by Process

vii. Cash Forecast

viii. Goals by Process

Obstacles

1. The time needed to build relationships of trust and collaboration within the management team.

2. Managers often want to “go do it themselves” rather than spend the time working with employees to get them involved, understand the importance of planning and gain their input.

3. Managers want to spend time on:

a. Detail costs of each program and expense

b. Formal presentations

c. Quantity of projects rather than defining the most important projects that would make a difference in productivity, quality, delivery or profitability

d. 5-10% improvements rather than the more difficult 25-50% improvement projects

4. Over committing on what can be done.

Results

1. Employee involvement.   Employees learn about the difficulties and realities of budgeting, the same as individuals must do with their finances. Sometimes there is a belief that there are unlimited funds since it is a corporation.

2. A more realistic roadmap.

3. A few important projects and goals that will move the corporation forward.

4. Clear Direction, Alignment and Commitment from and for the entire organization.

5. No time spent on constant Roadmap revisions because the Collaborative Business Roadmap is a roadmap and not a document to measure performance or determine pay. The Roadmap P&L is not recalculated once completed. The purpose of the work is to gain DAC which is done. It is a fluid document for manpower, capital, projects and discretionary expenses as the needs unfold throughout the year.

Our Principals have the experience and tools to help you gain Direction, Alignment and Commitment (DAC) with your Leadership team and engage all your employees. If you are ready for Transformational change in your organization, then you can learn more about our model in Manufacturing with Heart, A Holistic Approach, or, you can get started today by giving us a call at (614) 571 – 8586 or completing our Contact Us form.

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