How can Business Agility be enabled when we have annual budgeting? Beyond Budgeting is the answer

I’m sure many of us have heard one or a few of the following statements to justify a situation:

  1. “The project is over budget so is been cancelled, send the team back to their managers or cancel their contracts.”
  2. “We have to wait till next year’s budget to start that project.”
  3. “We can’t hire that person as we can’t fit them under the department’s budget until next year.”
  4. “We have to spend this budget now before the end of the financial year unless we be allocated less budget in the next financial year.”

Isn’t this behaviour the exact opposite of what the C-Suite would actually want to occur? If a Business Agility transformation was to be implemented in this organisation, this is definitely the type of behaviour we don’t want to see in an organisation that is trying to implement decentralised decision making and empowering all employee’s to take ownership & accountability.

It is generally agreed that if trying to increase employee engagement in organisations, the ongoing use of the current ,commonly used, annual budgeting process needs to be changed. Other approaches have been suggested including Participatory Budgeting which is aligned more with Scaled Agile (SAFe) however we feel that Beyond Budgeting goes further focusing on two key pillars:

  • Decentralised leadership
  • Adaptive management processes

There are 12 principles of Beyond Budgeting, see below, and even though they aren’t a checklist they are in general promoting:

  • Not using financial targets in communication to engage or inspire employee’s.
  • Empower and trust your employee’s to make the right decisions including the use of funding.
  • Minimise the control & rules around budgeting.
  • Targets should not be based on historical performance but external benchmarks.
  • Rewards should be based on holistic performance not financial only.
12 principles of Beyond Budgeting
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