Corporate Budgets — Outdated?

Does the corporate budget and its annual planning cycle still make sense in today’s rapidly changing and ultra global business world? Before you answer, keep in mind the impact that social media and the Internet, in general, has had in the way business is done.

After all, don’t your customers want, what they want, when they want it and delivered in the way in which they want it delivered from virtually anywhere on the planet? Most likely, the answer to that one is a resounding, “YES!”

So, I’m not so sure that the annual budgeting process is a management process worth preserving. But, I can be persuaded.

Here are some questions to consider when reimagining a management governance environment of the future and considering where “the budget” may (or may not) fit in:

  1. Does budgeting preserve “non-value” activities?
  2. Does budgeting set unreasonable targets that cause internal conflict, as people cut corners (and make promises that can’t be kept) just to make budget numbers?
  3. Does budgeting allow us to move quickly enough as market opportunities arise?
  4. Does budgeting hurt morale because too few have input, and, those who do are too far removed from the front-line to have a clear picture of what is needed to compete?
  5. Does the budget cause confusion when the assumptions that it was based on prove to be inaccurate?
  6. Does the budget align with the velocity of change? Can it account for and shift fast enough to enable agility?
  7. Is the 20-25% of senior executive time used to plan and maintain the budget worth the price?
  8. Does budgets kill initiative? Are most ideas being squelched because they don’t fit into the prevailing budget?

When I weigh the pros and cons, I end up wondering if embracing target setting, rolling forecasts, action planning and team accountability may be a better way to go. Think of “strategic intent” and game plan for the big picture, instead of worrying about maintaining status quo (just so we have a solid budget year-to-year).

With that, please let me know what you think the answer is to the question that I posed at the outset, “Does the corporate budget and its annual planning cycle still make sense in today’s rapidly changing and ultra global business world?”

Feel free to weigh in, right here….Thanks!

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