Have you ever seen a friend about to make a huge mistake but you cannot seem to find any way to stop them? That’s how I feel about this time every year. I know calendar year-end companies are issuing their budget instructions and timelines. These will include submission dates and other requirements. For many companies, it is merely the prelude to the Annual Budgeting Dance.

Many field organizations will diligently plan their opening moves. What do they submit that is sufficiently credible to avoid outright rejection yet remain low enough to be easily reached?

Corporate is already planning its counternegotiation strategies to leverage the field up so that when the totals are all compiled the resulting sum will be sufficiently above whatever the magic number that is needed to please Wall Street.

The Annual Budgeting Dance is merely the ritual of getting to a set of mathematical relationships that match those numbers. It’s a lot like musical chairs but not nearly as much fun. It explains why the budgeting process is filled with numerous iterations. Organizations typically take three or more iterations to get to a final budget (with the last one typically forced because there is no more time).

On the third iteration, the guy in the field in exasperation states, “Just tell me what you want the number to be. I am tried of guessing.” Corporate replies, “I can’t tell you. It needs to be your number. You need to own it.” The field quickly lets him know, “It quit being my number two times ago.”

In many ways, this exchange explains why budgets destroy motivation and ultimately are disempowering. As David Cooke, CFO of Park Nicollet, described the challenges he faced when he eliminated budgets in 2005, he stated that managers had learned to use budgets as a crutch: “If the amount was in the budget, a manager concluded he had to do it. If it was not in the budget, he concluded that he could not possibly do it. Either way, he never had to make a decision on whether he should do it or not.”

This back-and-forth seems like so much dumb stuff I wonder why can’t we get it right the first time. And why is the resulting output a set of crutches so that managers can avoid making decisions?

So again, why do we keep doing this dumb stuff???

If you feel like you are trapped into doing dumb stuff, add a comment or drop me an email. You can remain anonymous. We will discuss what finance can do to transform into a higher-value-added function where value is created. ###

I’ve been poring over feedback to Business Finance’s recent budgeting and planning survey. One finding was really quite shocking.

We asked survey respondents (i.e., you!) when you expected your 2009 annual budget to lose its usefulness. Roughly 65 percent of respondents said they expected their current budgets to become invalid by the middle of the year. Here’s what’s even more startling: 20 percent of survey respondents said they expected their 2009 budgets to become useless before the year even began.

So, why do we continue to invest time, sweat, and frustration in the traditional annual budgeting process? Think about how much time and how many resources your organization commits to its annual budgeting process. The Hackett Group’s research finds that organizations spend 25,000 man days per billion dollars in revenue on these processes. How does that compare to your estimates? more

Thank you! I’m getting some very intelligent “Dumb Stuff” ideas from you, and I appreciate it.

As I mentioned in a previous post, for several months I’ve been piecing together a “Stop Doing Dumb Stuff” list. I hope this list will help liberate overburdened finance and accounting managers and executives to more effectively address the new priorities and programs streaming into our departments.

Here’s a (dumb) gem several people recently sent me: The Monthly Financial Close. Why do we do it? more

I’ve been speaking to finance managers and executives around the country fairly often this year. Many of these recent engagements have taken place at dinners, where the wine and the discussions tend to flow freely as the evening progresses.

One of the most common (and most candid) comments I continue to hear relates to the challenge of taking on additional work – more priorities – without adding either money or manpower due to tough economic times. Most finance managers I speak with want to support the changes they are being asked to make, but they are overwhelmed by yet another “A” priority. What so many finance managers are really looking for is a way to carve out time and space to take on this new and crucial work without increasing costs. In our late-night discussions, we jokingly commented that we could take on more if we could find ways to stop doing much of the dumb stuff we often feel compelled to do. These discussions quickly grew into a running list of “Dumb Stuff We Should Stop Doing!” more