Saturday, July 17, 2004

Get rid of budgeting!

In an article in last month's Harvard Business Review, Robert Howell says we have to change our report formats and even our vocabulary, since focusing on growth requires an attitude adjustment. Indeed when you think of forces that contribute to the long term growth and prosperity of your company, your budgeting process is probably not amongst the first things that came up :). On the contrary, bottom-up budgeting, with its focus on short-term earnings and making short-term numbers and its death grip on performance measurement, control and rewards, is one of the forces arrayed against you! That's why Howell presents a cool idea: get rid of the word 'budget'!
From now on we will use 'profit plan' or 'value-creating plan'. Or who has an even better idea to replace the word 'budget'?

2 Comments:

Blogger Lawrence Rosier said...

Because Private industry is focused on growth I understand your recommendation for top down performance measurement and top down budgeting. But in government where growth is discouraged I recommend bottom up performance measurement and Bottomup Budgeting. This allowes surplus tax dollars to be held in a general fund.
I have developed a comprehensive management process for government as a part of my government reform recomendations found at: Management Consulting Forum Http://managementconsultant.blogsome.com
My EBooks on the subject are at: EBooks by L Rosier http://ebooksbylrosier.blogspot.com
My Podcast on ebook1 Guide to Reforming Government Series is at: http://www.ourmedia.org/node/22127312

11:34 AM  
Anonymous Performance Management Kit said...

A results focused planning and
budgeting framework which focuses on three elements: the strategy (how to achieve outcome), outputs (activities to achieve final outcome), and the result (final outcome). Performance-based budgets use missions, goals and objectives to justify funding. Through the allocation of resources, performance-based budging achieves specific objectives based on program goals and measured results. As a result, it is possible to understand which activities are cost-effective in terms of achieving the desired result.

3:12 AM  

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