Read the attached article from the Wall Street Journal. Annual Budgets
How does the company you work for budget? What do you think they could learn from this article?
00 Verizon 10:00 PM ) 38% THE WALL STREET JOURNAL OURNAL REPORTS: LEADERSHIP Companies Get Budgets All Wrong The annual budgeting process leads to bad decision-making. it needs a total overhaul By KENNETH A. MERCHANT Updated July 21, 2013 4:01 p.m. ET Almost all companies prepare a budget, or annual operating plan. And almost all companies do it wrong. That shouldn't come as a surprise to managers, many of whom are highly critical about both the way budgets are prepared and the way they are subsequently used. The typical budget process, they say, mainly serves to distract managers from doing their jobs and to discourage them from taking risks. It undermines integrity, distorts information and leads to bad decision-making from mailroom to boardroom. They complain, for instance, about the endless meetings where managers crunch and discuss numbers that have long since gone out of date. They complain that budget targets are almost universally defined in backward-looking financial terms and as a result don't reflect what successes-or failures-an organization may currently be having At the same time, they say the budget processes too often serve as opportunities for self- who earn the best performance ratings are often the most skilled in negotiating easily achievable budget targets for themselves. Even more damaging, many will manipulate numbers in their budget reports to inflate results and artificially achieve short-term targets. And others will spend money JOURNAL REPORT insights from The Experts Ohttp //stream usjcom/story/lesperts wastefully so as not to see a reduction in next year's budget allocation. Can the problem be solved? To a large extent it can, if companies can only recognize that the annual budget process is too inflexible, too infrequent, and too easy to manipulate, to accomplish all of the functions it is expected to-including strategic MORE IN LEADERSHIP CORPORATE How Companies Can Raise Prices Withost lienating Custemees 00 Verizon 10:00 PM ) 38% THE WALL STREET JOURNAL OURNAL REPORTS: LEADERSHIP Companies Get Budgets All Wrong The annual budgeting process leads to bad decision-making. it needs a total overhaul By KENNETH A. MERCHANT Updated July 21, 2013 4:01 p.m. ET Almost all companies prepare a budget, or annual operating plan. And almost all companies do it wrong. That shouldn't come as a surprise to managers, many of whom are highly critical about both the way budgets are prepared and the way they are subsequently used. The typical budget process, they say, mainly serves to distract managers from doing their jobs and to discourage them from taking risks. It undermines integrity, distorts information and leads to bad decision-making from mailroom to boardroom. They complain, for instance, about the endless meetings where managers crunch and discuss numbers that have long since gone out of date. They complain that budget targets are almost universally defined in backward-looking financial terms and as a result don't reflect what successes-or failures-an organization may currently be having At the same time, they say the budget processes too often serve as opportunities for self- who earn the best performance ratings are often the most skilled in negotiating easily achievable budget targets for themselves. Even more damaging, many will manipulate numbers in their budget reports to inflate results and artificially achieve short-term targets. And others will spend money JOURNAL REPORT insights from The Experts Ohttp //stream usjcom/story/lesperts wastefully so as not to see a reduction in next year's budget allocation. Can the problem be solved? To a large extent it can, if companies can only recognize that the annual budget process is too inflexible, too infrequent, and too easy to manipulate, to accomplish all of the functions it is expected to-including strategic MORE IN LEADERSHIP CORPORATE How Companies Can Raise Prices Withost lienating Custemees
