The Planning Peril (2000)

Redesigning the budgeting function? Avoid built-in risks. Congratulations! You've just been picked to be part of a team to redesign your organization's planning and budgeting process. This is your chance to be a star and make a significant upward career move. Or is it? As a corporate planning veteran, here's my viewpoint: Any effort to undertake a redesign is studded with land mines, both professional and personal. Such projects often fail, and they've also been known to dead-end some promising careers. So tread carefully--and read on for suggestions on how to maneuver around those mines. CAN WE TALK? First, let's look at why the revamping process is so perilous. Exposure. The budget process touches nearly everyone in an organization, especially top management. And if the new plan lacks widespread support and fails to deliver what it promises, an accusing finger will be pointed at the highly visible redesign team. Expectations. There's always a natural tension between senior management and operating managers. Usually, the senior team pushes departments to boost revenue and cut costs, while the operating managers try to negotiate lower, more-realistic expectations. The tug-of-war negotiations frequently inject a certain amount of politics into the process. A recent CFO Magazine survey disclosed that two-thirds of management respondents thought politics more than strategy drove their companies' budget process. Redesigning the budget planning methodology can be emotionally charged as a result. Denial. Many managers wish the planning process would just go away. Since seminars and articles on the budget process often focus on how to save time rather than on improving effectiveness, top managers tend to believe that the whole procedure is little more than a necessary evil. If that's the pervasive belief in your company, it will be tough to get support. So what can you do to improve your chances? RULE 1: DON'T EXPECT A SILVER BULLET For every planning redesign success story--whether it applies to rolling forecasts, continuous planning or activity-based budgeting--there are a dozen failures. As a management consultant for many years, I can say without question that there is no one-size-fits-all solution. Prefabricated solutions address only the more superficial aspects of planning, not the root issues that most frequently undermine it. Such issues usually include, among other things, a widespread lack of accountability, ambiguous goals and objectives, insufficient linkage between long-term strategy and short-term operating plans and--the one omission that drives a stake through the heart of any plan--a lack of personal incentives to achieve planned goals and objectives. Perhaps the most widely accepted cure-all for a bad planning and budgeting process is technology--that is, an expensive software program--and it's often the first to be prescribed. The CFO of one of the country's largest pharmaceutical companies found out the hard way that new software doesn't provide an automatic fix. After one particularly rough annual planning cycle, a third of the finance team was ready to quit, complaining of 16-hour days for weeks at a stretch. After going through dozens of plan iterations only to wind up with a budget that nobody could support, they were demoralized. They believed that nobody outside the finance department took the planning process seriously, and that most managers viewed it as little more than a horse-trading exercise. In addition, the operating managers complained they were being taken away from their real work to spend time on make-work. Frustrated, the finance group concluded that the problem was really about technology, and that state-of-the-art budgeting software would solve their problem. They were wrong. Even with the new technology, the next year turned out to be worse. Not only did the finance team have to contend with the same old problems but, in addition to all their other concerns, they had to learn a new, complex (and temperamental) budgeting system, too. …