|Just a thought, from RESULTS ORIENTED|
"Do we really need budgets?"
Studies show that budgets consume up to 30% of management time and 79% of finance's time. Worse still, 9 out 10 people in finance think it is "cumbersome and unreliable".
Removing the budget process can save money. For example, the Ford Motor Company spends $1.2Billion USD, per year, on their budgetary process.
But more importantly, if you release people from the mind-numbing budgetary command and control environment, they will power the business forward.
This requires a move away from budgets with fixed annual targets, towards longer term benchmarks, against peers, competitors and best-in-class organizations.
Does it work? Ask the Scandinavian bank, Svenska Handelsbanken. In 1960 the bank was in trouble. Now in 2004, Svenska outperforms all other Scandinavian banks on measures such as return on equity, total shareholder return, earnings per share, cost-to-income ratio and Customer satisfaction.
Removing budgets, requires free flow of information, coupled with changes to how organizations work. Good IT skills will provide the information in a timely manner. But changing an organization, takes time, care and courage.
Source: "Who Needs Budgets", by Jeremy Hope and Robin Fraser, in the Rotman Magazine, Fall 2004.