Winning CFOs: Implementing and Applying Better Practices, with Website

CHAPTER 14

Throw Out Annual Planning and the Associated Monthly Budget Cycle

Let us get one thing straight: The standard annual planning process takes too long, is not focused on performance drivers, is not linked to strategic outcomes or critical success factors, leads to dysfunctional behavior, builds silos, and is a major barrier to success. Organizations around the world are questioning the value of the traditional annual budgeting process.

Jeremy Hope is the world’s foremost thought leader on corporate accounting issues. Hope has an uncanny ability to always be at least five years ahead of what better corporate accounting practices should be. Hope has stated that not only is the budget process a time-consuming, costly exercise generating little value, but it also, and more important, is a major limiting factor on how your organization can perform. He has many examples of how companies following the philosophies he has expounded have broken free and achieved success well beyond their expectations. Here are three quotes that challenge the very concept of budgeting.

So long as the budget dominates business planning a self-motivated workforce is a fantasy, however many cutting-edge techniques a company embraces.

Modern companies reject centralization, inflexible planning, and command and control. So why do they cling to a process that reinforces those things?

The same companies that vow to respond quickly to market shifts cling to budgeting—a process that slows the response to market ...