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A 10-Part Series by Bruce Anderson, a Revenue Focused Strategic Planning & Business Management Consultant

In my mid-20’s I crossed the street with my boss from the Tracy-Locke advertising agency in downtown Dallas and entered the gleaming new 56-story First International Bancshares Tower. I was a rookie there for my introduction to annual planning on the First National Bank in Dallas advertising account. My instructions were clear. Speak if spoken to and then keep the conversation to the personal basics – the equivalent of name, rank and serial number. Most importantly, my role was to listen carefully and take thorough notes.

A few decades later, I’ve participated in budgeting and planning processes with over 115 different organizations in more than 20 industries. I’ve worked with public and private companies marketing a wide range of goods and services regionally, nationally and globally.

I’ve been lucky to be around a lot of really smart people who freely shared their wisdom and gave me some great training. I used to call one of my very best mentors my wizard. I told him, “When I’m around you it’s like I’m living in reverse. You’ve seen the future and you prepare me for trials before they’re ever presented”.

Now my hair is grey and I’m in a place to help prepare others for the trials ahead.

Over the next 10-weeks my intention is to use this series of columns to attempt to inspire organizations to reflect on their planning and budgeting processes and consider ways to get better at making and executing strategic operating plans.

I’ve made a list of derailleurs that persistently interrupt and interfere with the planning process. These recurring pratfalls lead to failure to meet goals, maximize important opportunities, and sustain a constructive and productive organizational planning psychology.

Installment 1: Budgeting vs. Planning.

To create a Strategic Operating Plan, you need a Situation Analysis, Objectives, Strategies, Tactics, Responsibilities, Timing, Measurement Methods, and a Budget … in that order.

So inherent in most annual budgeting processes is a potentially lethal flaw … to maximize success, planning needs to inform and guide budgeting instead of being shackled by it.

We’re in the budgeting season now and it often reminds me of a prize fight with the CEO in the center of the ring announcing, “Welcome to our Annual Fight Fest! In this corner we have Budgeting and the opposite corner Planning. Good luck ladies and gentlemen. Let’s have a good clean fight.”

Jack Welch, former Chairman at GE once said: “The budgeting process sucks the energy, time, fun, and big dream out of an organization”. I’m certainly no Jack Welch but I’ve seen it happen time and time again in organizations of all sizes.

All kinds of planning take place in an organization. I’m focused here on annual operating planning and what I call the “Budgeting Culture” vs. the “Planning Culture”. In my experience, too many organizations have an intimidating Budgeting Culture that suffocates planning.

A Budgeting Culture is easily recognized because most planning is done within the framework of an institutionalized budgeting process led and rigidly-controlled by managers in the accounting department. By nature, these managers possess a tough expense control mindset and they’re invested with a lot of authority during the annual budgeting cycle.

In the budgeting process, the individuals with budget responsibility (the budgeters) are provided budget and spending data for the current and prior year (or years) plus information about how the process will flow including the deadlines for completing each of the prescribed steps. The budgeting packet also usually includes guidelines imposing limits on payroll increases and other line items for the coming year. Compliance with the numbers suggested in the packet is certainly favored. The desired outcomes often seem pretty apparent to the budgeters from the beginning.

During the Annual Fight Fest, challenges will usually be entertained. However, since the Budgeting Culture is driven by expense management and control, all too often, significant investments of well-intentioned time and effort spent crafting a business case for supplemental spending to fuel growth proves to be a waste of energy.

It can be a very short-fight with even the best requests for budget increases summarily red-lined with limited to no discussion. And, if a well-documented and especially-persuasive idea does get a green light, the budgeter will clearly understand they will be accountable for achieving the promised revenue that justified the increased spending.

A familiar refrain from the budget maestros is, “this is a complex, mandatory annual exercise that needs to be completed in short order so meet the deadlines, keep things tracking, and don’t rock the boat.”

After hearing a few bars of that tune, in a Budgeting Culture led by a tight-fisted CFO, most of the budgeters are inclined to throw in the towel leaving the fresh thinking and innovation that sustain relevance and drive growth in a heap on the mat.

Think about it. Is Jack Welch right? Who’s winning the fight at your place? More next week.

Bruce Anderson is president and CEO of Anderson Consulting. Contact him at ba@acdallas.com and @bruceadfw.

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