Hello,
In the 1920's James McKinsey defined some core budgeting principles and practices in his book 'Budgetry Control'- the design of today's general ledger is based around that. Financial corporate and business unit performance is also structured around this pervasive system.
This poses some interesting challenges for today's management. A Corporate Planning function typically plans and develops the over-arching strategy, the vision and mission for which the organisation exists and the objectives against which resources are to be prioritised, aligned and re-aligned.
Financial resources are established as a key component that impact the success of strategy implementation in today's fast-paced, and somewhat unpredictable business environments.
However, a challenge bears to weight when strategic planning traverses upon one path; that to understand and delineate the why, what and how of the organisation's focus over a defined period. And the budgeting organisations traverse a path of managing the financial element. Each of these paths often make some inroad into the territory of the other. However, gaps continue to remain.
There are some important points of consideration that can provide useful guidance in this area:
Regards,
Musab
In the 1920's James McKinsey defined some core budgeting principles and practices in his book 'Budgetry Control'- the design of today's general ledger is based around that. Financial corporate and business unit performance is also structured around this pervasive system.
This poses some interesting challenges for today's management. A Corporate Planning function typically plans and develops the over-arching strategy, the vision and mission for which the organisation exists and the objectives against which resources are to be prioritised, aligned and re-aligned.
Financial resources are established as a key component that impact the success of strategy implementation in today's fast-paced, and somewhat unpredictable business environments.
However, a challenge bears to weight when strategic planning traverses upon one path; that to understand and delineate the why, what and how of the organisation's focus over a defined period. And the budgeting organisations traverse a path of managing the financial element. Each of these paths often make some inroad into the territory of the other. However, gaps continue to remain.
There are some important points of consideration that can provide useful guidance in this area:
- Organisational change is a natural process that takes time, requires leadership and a concerted effort. The unfreeze-change-freeze cycle if rushed leads to blunders that may not be realised until some time has passed.
- Astute organisations look for ways to help close the gap. One proven approach is the Balanced Scorecard. The Financial perspective can define objectives, measures and targets that are integrated with the Budgeting policies and processes. This way adjustments needed impact both the strategic planning and budget control simultaneously. This leads to more diligent management of financial and non-financial resources alike.
- This mechanism provides another benefit; the ability to visualise the link between budget spend and key initiatives; thus demonstrating the business value of dollar-spend.
- The mapping of budget spend against the strategic objectives brings another perspective; it permits the discerning of budget spent on keeping the engines running cf budget spent on strategic initiatives.
Regards,
Musab
