It's budget season soon. Many executives are dusting off the budgeting machinery and rallying the troops to create the critically important 2016 budgets.
Is Budgeting a Blessing or a Burden for your organization?
For those using their visible, data driven and updated strategic asssumptions about the outside world (i.e. Market Growth, Competition Moves, Technology Disrupters and Economic Cycles) they are primed to respond with meaningful ways to exploit or mitigate EXTERNAL trends for 2016 based on how and where they should compete (and not compete).
In turn, their budgets will reflect "Street Smart" insights with "The Critical Few" factors pointing them to where their profits lie.(and having a higher confidence in achieving their comp. or bonus plans) Their leadership team and importantly, sales team, (or Managing Directors or Market Leaders )will have provided valuable input and will buy-in to the Company GOALS (Budget numbers) they've collectively authored.
In short - they are motivated owners of their numbers because they have connected OUTSIDE to INSIDE
On the other hand ---- there are those organizations who are not looking forward budgeting this year. The genuine sweat equity by leaders and ground troops will be side-swiped again by numbers spawned too much on internal folklore rather than outside trends.
Worse, they know when all the numbers are crunched, all the meetings for approval completed, and all spreadsheets handed in, they will have arrived at the MAGICAL 10% Growth NUMBER for 2016 Budget. (Funny, that was the same as last year they were thinking.) They have worked the budget machinery, spent all the hours and resources to create something that is purely operational and unrelated to strategic reality.
In Short - they have committed the biggest budgeting mistake that kills profits - using only INTERNAL DATA NOT TIED to EXTERNAL DATA and ASSUMPTIONS Why does this INTERNAL ONLY method hurt?
All three of these effects above reduce the profitability that is rightfully yours.There are 3 immediate things you can do to avoid the BIGGEST BUDGETING BLUNDER (i.e. NOT connecting your strategy and critical few external assumptions to this year's budget.
The budgeting process is a critical operational element for companies but we must not neglect that it's numbers should be derived from your company's strategy.