Budgeting falls short in popularity poll
Of all the management duties that businesspeople perform on a regular basis, budgeting might be the least popular. In fact, not only is budgeting unpopular, it has actually been condemned and vilified as a business practice. In his book Winning, former General Electric CEO Jack Welch famously said, “The budget is the bane of corporate America. It never should have existed.” He added, “…the budgeting process at most companies has to be the most ineffective practice in management…And yet…companies sink countless hours into writing budgets. What a waste!”
Well, that’s rather negative. Of course Jack Welch is known for his brash talk, so he must be exaggerating, right? Apparently not. Tech author Stewart McKie, writing in his guide to financial software, Financial Analytics, said, “In many organizations, this process is tortuous.” And in Best Practices in Planning and Performance Management, performance management guru David A. J. Axson offered this colorful description of people’s attitudes toward budgeting: “For most people, the annual budget process induces emotions akin to tooth extraction without Novocain.”
Ouch. What is it about budgeting that elicits such strong opinions? Axson explained that “Budgeting takes too long, is too detailed and delivers little of lasting value. At most companies, the budget is obsolete the day it is created.” In addition, Axson and others have observed that the budgeting process is often fraught with gamesmanship and politics.
The fault is not in our stars, but in our spreadsheets
Some of the blame, however, lies with the frustrating mechanics of budgeting. Stewart McKie noted that “the tools used to manage the process are often not suited to the task.” The tools McKie is referring to are primarily spreadsheets and email—the default budgeting tools used by many organizations. When budgeting is performed with spreadsheets and email, too much time is spent on manual tasks, and collecting, consolidating and validating data. Spreadsheets are distributed by email, they get populated and then may be modified in unexpected ways. And when they come back, combining and reconciling the different versions is an exasperating exercise. Not to mention the issue of spreadsheet error, which I discussed in my blog, The top three spreadsheet errors of the decade—so far.
Political issues aside, is there any way to make budgeting less painful and more useful? Fortunately, there is—and it involves IBM software. And ironically, it also involves spreadsheets. They have been a popular tool ever since they were introduced decades ago. Finance professionals, as well as many non-finance folks, are very comfortable using them. And so IBM budgeting solutions allow users to combine the familiar Microsoft Excel interface with capabilities that enable budgeting that takes days, instead of months. Manual tasks are automated and participants in different business units and locations can take advantage of a streamlined, integrated process.
Budgeting with IBM financial performance management solutions eliminates most unproductive spreadsheet activities such as tracking down numbers, fixing broken links and debugging macros. And it helps make people more accountable, with a workflow system that lets managers track the status of contributions with intuitive, color-coded icons. All of which makes budgeting—if not everyone’s favorite way to spend time—at least much more bearable.