Across the corporate world, managers are working furiously to finalize their budgets for 2011; many no doubt praying that this year's effort will prove more accurate than in previous years. Unfortunately, their best efforts are likely to be thwarted on two counts: first their crystal simply isn't good enough to get much right when looking long into the future (and 30 days is a long time now!); second, all their work is likely being undone at this very moment. Picture the scene:
Location: A windowless conference room on the executive floor of Hype Inc
The CFO, Henry, opens the meeting: “Well, the third iteration of the budget is a lot better, but we still have a $15 million gap. Steve (the CEO) has to present to the Board next week, so we have decided to take a few decisions to close the gap. Marketing, you need to cut $2 million from your advertising budget in both Q3 and Q4. Sales, you should delay the hiring of the Indian sales team from Q1 to Q3 and cut the travel budget by 10 percent. Purcashing , we just cannot do the purchasing system next year so that’s out, and Candice (the CIO), you will have to go back to MegaOffshore and get them to take their monthly fees down by $250K.”
Sales asks, “What about the sales targets?” Henry looks at her and replies, “Steve will not reduce the sales targets. Both he and I are convinced there’s plenty of fat left in the operating budgets, so these decisions simply cut that out. My team will send out revised budgets to each of you later this afternoon. Each of you needs to make sure your team updates their individual budgets to reflect these changes and submit by the end of the week. Thanks, we are done here.”
Good luck and Happy Holidays
The Management Mythbuster
So true! Raises the question why we spend so much time developing the budget.
Posted by: Christoph Papenfuss | 14 December 2010 at 02:59 AM