August 19th, 2014
Every year all companies face the same challenge of developing the budget for the upcoming year… something that we are currently finalising. The extent of that planning will vary among companies, but generally companies need to have targets for the next year which are focused on revenues and expenses, resulting in what everyone hopes will be a healthy bottom line and reasonable growth.
Great companies are very good at this planning process, understand what it takes to meet their targets and their forecasts will be fairly accurate, not withstanding the obvious impacts of recessions and other unforeseen calamities.
Many companies however employ a less than strategic approach to their planning, and very often managers are allowed to feel like they don’t actually “own” the plan. In these circumstances the numbers achieved are more a result of chance, than of planning and execution against a plan!
“Plans are only good intentions unless they immediately degenerate into hard work.” Peter Drucker
This is what I call the Hope and a Prayer Strategy.
Step 1. Pick a number
Step 2. Share that number (maybe)
Step 3. Hope you hit that number
It is not a very satisfying way to manage, because every month when the numbers roll in those managers cross their fingers and hope. Invariably fate is not kind and the result is a habit of failure, and excuses for that failure.
“Planning is a process of choosing among those many options. If we do not choose to plan, then we choose to have others plan for us.” Richard I. Winwood
Managers MUST truly OWN their plans. They need to own the targets, the responsibility for the tactics that will ensure their success, and for adjusting those tactics along the way when things don’t go as planned!
This is a more strategic approach to the annual budgeting exercise, and has a far higher chance of success!
Step 1. Develop a budget with input from executive, management and delivery teams. It should be realistic but with adequate growth, and built based upon known opportunities and reasonable expectations.
Step 2. Communicate the plan to all concerned, together with the tactics that will be employed to meet the plan. Adjust tactics at this point to ensure success and ensure that everyone buys into the targets. EVERYONE needs to accept accountability at this point.
Step 3. Start to execute against the plan.
Step 4. Measure on a regular basis, at least monthly to ensure that assumptions are reality, that activity is tracking as expected and that results are in line with expectations.
Step 5. Adjust tactics as needed to ensure the next results meet expectations, and will compensate for any shortfall year to date.
Step 6. Go back to Step 3 and repeat every month (or chosen cycle) through the fiscal year.
“By failing to prepare, you are preparing to fail.” Benjamin Franklin
The big word here is ACCOUNTABILITY. Everyone needs to be accountable so that the culture is one of pursuing success, not one of developing excuses for failures.
Kevin Dee is CEO of Eagle (a Professional Staffing Company)
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