I noticed that President Obama’s poll standings have rebounded as he focuses more on the economy. Earlier this week, The Wall Street Journal published an op-ed column that the President authored in which he called for a review of all government rules and regulations to “root out regulations that conflict, that are not worth the cost, or that are just plain dumb.”

This is excellent advice – not just for regulators, but for business leaders and managers, too. Regular readers know that I have often emphasized the need to stop doing dumb stuff. The traditional annual budgeting process, of course, tops my own Dumb Stuff List.

Let’s see how President Obama’s list of dumb regulatory practices (and corrective guidance) applies to the traditional budgeting process …

“Root out regulations (processes) that conflict”: Traditional budgets are plagued by numerous conflicts. As explained by Statoil’s Bjarte Bogsnes, author of Implementing Beyond Budgeting (Wiley 2009), “Budgets are asked to do three things that conflict with each other,” Bogsnes asserts. First, he explains, budgets are used for target-setting (an activity that is is also used as the basis to reward managers). Second, budgets are used to serve as the basis for resource allocation. The third purpose of the budget? Forecasting. Here’s the problem: When you have one process trying to achieve all of these objectives simultaneously, the result is suboptimal. Executives want to set stretch targets but managers seek to minimize their goals so that bonuses are easier to reach. As a result, the sandbagging is rampant.

I’ll follow with two more comparisons in my next post …

Where in the World Is Steve? During the week of Jan. 24, I will present a Business Finance Web cast sponsored by Prophix (on Tuesday, Jan. 25) and then travel to Tennessee to work on Beyond Budgeting implementations Jan. 26-27 Be sure to take advantage of the Super Early Bird discounts to the 10th Annual BBRT Conference in Chicago on April 27-29, 2011. ###