If your life is like mine, you face an overwhelming array of ways to spend your time. Some of these time investment opportunities seem to hold the promise of greater success. The potential value of other opportunities remains more mysterious, such as those emails from people who sound familiar but you just can’t quite remember why.

Still other “time consumers” seem more necessary because we feel expected to perform them – reading the morning papers and fresh content on our favorite Web sites, for example. After all, don’t our bosses, clients, and colleagues expect us to keep current on our rapidly changing world?

But how necessary – and how valuable – are these time-investment opportunities, really? more

This time of year usually brings a brief period of relief for finance teams within organizations that use a calendar year-end.

Hopefully, your weeks of budget negotiations have finally concluded with the board approving a 2010 budget. Yet for many, this “accomplishment” fails to generate any deep satisfaction. It feels shallow because good managers know that the actual shelf life of a budget is very short.

The 2009 Business Finance survey of planning, budgeting, and forecasting practices (view here) researched how long budgets remain relevant. Two-thirds of the respondents said they were obsolete within four to six months. Even more startling: In 2009, a whopping 28 percent of respondents acknowledged that their budgets were obsolete on day one. more

For organizations with calendar year-ends, November is typically the month for finalizing next year’s performance plans. While these can feature a balance of measures, these incentive plans often focus heavily on tying bonus payouts to achieving budget targets. Many admonish the need to “pay for performance.” But I question, “What are you really doing?” Is it “pay for performance” or “pay for negotiated results”?

The process begins with managers submitting their proposed budgets. These often feature low goals (which could be called conservative but are more often known by their common name of “sandbagging”). Corporate must then reject them as too low and/or begin negotiating to leverage them up to a minimum acceptable level. The back-and-forth has several negative consequences.

1. It wastes valuable management time and costs money.

2. It strips local managers of their natural accountability as their plan is squeezed into corporate’s goal.

3. It causes managers to hoard information. No one wants to share information that could be used against you.

4. It can lead to unethical behavior.

5. It causes the organization to limit their potential by focusing on easy-to-achieve targets.

6. It rewards the best negotiators instead of the best operators.

7. In the words of Jack Welch, “this budgeting sucks … the energy and big ideas out of the organization.”

So, is tying incentives to budget targets “pay for performance”? No. At best, it is pay for negotiated results. It is a management process that can kill your organization and is part of the dumb stuff that finance should stop doing.

For more on what you should be doing instead, see my blog post on “Rewards & Incentives” at Adaptive Planning’s community site here.

Join us in the Beyond Beyond Budgeting Round Table here. ###

I would like to apologize to those of you who regularly look for my blog on Finance Transformation. As you may have noticed, I have not posted an update in the last five weeks. It has been a difficult period, and I appreciate your patience.

I have been working with my team at The Player Group to create an entertaining and enlightening path forward. One of our ideas is to share some of the things people say about planning and budgeting. We are also researching quotes about change in general and enabling change within your organization. Some quotes have a way of sticking with you. One that sticks with me is one from a boxer, who said:

“Everyone has a plan until they get punched in the mouth.”

Last fall’s economic downturn was a smack in the mouth for many organizations. The City of Chicago’s Olympic hopes of hosting the Summer Games took a hit when they were eliminated in the first round of voting. Here at The Player Group we suffered a tremendous blow when my younger brother, Michael, unexpectedly passed away last month. In many ways it feels like a boxer’s punch, and all life’s plans don’t seem to make any sense anymore.

When these things happen, you often must do what boxers do: Cover up and protect yourself from further damage. But you will never win if you stay covered up, hunkered down, or withdrawn from your pursuits. You have to find ways to re-engage. At The Player Group, we find strength in thinking about what Michael would want us to do. His voice still rings in our memory. We want to honor his wishes and strive to finish the work he joined us in.

Many exciting things are coming soon, including our new book on forecasting (coming to the U.S. in January 2010). We will also be announcing additional resources that will add dramatic new ways in which we can help you transform and also provide exciting new implementation tools, as many organizations are moving directly to implementation.

Today, I am happy to advise you of some great content on the Beyond Budgeting principles that are available through BBRT member Adaptive Planning. Please take a look at their Web site for my blog posting titled “Goals of Financial Planning: Stretch for the Best,” where I focus on switching from internally negotiated, annual fixed targets to stretch goals based on long-term external benchmarks to boost performance and increase shareholder value.

This blog posting can be found here.

If you are new to Beyond Budgeting, you should start with the blog posting titled “Budgets: The Case for Change.” ###

My week opens with a practice run-through for the BBRT’s upcoming webcast “How to Communicate Change: A Change without Migraines Resource,” featuring expert Rick Maurer. Click on this link to sign up.

Attendees will review the Cycle of Change, which starts with people “In the dark” and hopefully moves to “See the Challenge.” Both of these must be achieved before you can “Get Started.”

As I reflected on this conversation, I realized what difficulty many finance professionals have with change. Yesterday, I received an email from an accounting association executive we are trying to work with on transforming finance. The fact that he sent it on Sunday indicates his hard work and dedication to his mission. Yet his reply left me with great concerns. He and his staff had discussed our Beyond Budgeting proposal. They replied that they were interested in “better” budgeting. It is a response that I often get. more