Despite the UK Government issuing it’s new budget today - oh utter joy, btw - this post was motivated by IT budgeting experiences.
I consider budgeting to be waste. A budget is based on assumptions and estimations and therefore, without constant refinement, which seldom happens, it gets out of date fast. And the whole process of arriving at the budget amount is shamefully stupid and entirely comical! It goes something like this ..
Someone gets to spend an inordinate amount of time, usually painful time (living the myth that it’s possible to know everything at the start), trying to calculate the amount of money needed to deliver X. That amount is submitted, consolidated and rolled up into department, division and ultimately company figures, undergoing a protracted review process en route that typically results in the amount being summarily cut. Of course, this is all a silly game and everyone knows how it’s played. The submitter, to ensure he receives the amount he feels he needs to get the job done, exaggerated the amount in the first place. He purposely over-budgeted in his submission in anticipation of budget cuts. The reviewers know this. And the submitter knows the reviewers know and .. sigh. What starts out involving the operational realities soon becomes a purely financial planning exercise that is divorced from those operational realities. The futility of it all.
It gets dafter. Ever heard of people rushing to spend the remaining money from this year’s budget before the year runs out so they won’t suffer budget cuts next year? WTF!
This all works so well, right! There’s got to be more effective ways.
2 Comments
I totally agree, check out Beyond Budgeting . The points you've made here have been made again and again in management accountancy since the early 70s, and yet there are still very few companies that have adopted more adaptive mechanisms.
I agree with everything you say. Except perhaps it can sometimes be useful? Occasionally it can act as a distraction to management while teams actually Get Things Done :-)
As for few companies adopting more adaptive working, I see it as similar to the dinosaurs. It took a long time (and a cataclysmic event) before the more intelligent mammals got the evolutionary edge. Maybe, just maybe, the meltdown of the financial system and the current financial crisis is the metaphorical meteor we need....