Operations Function

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Viewpoint A

Summary: A successful Plan and Budget will emphasize or, at least, take into account the operational reality of the functions of the entire organization. If the Budget/Plan lacks operational relevance, the Plan/Budget may end up being more a negotiation about abstract numbers rather than a process to ensure accountability and coordination. More...

Viewpoint B

Viewpoint B Description

Benchmarks, Resources, Recommendations, Implications

Viewpoint A

A successful plan and budget has relevance to those who are responsible for carrying out the organization’s operations. Effective planning and budgeting, therefore, uses data that is relevant to the operational environment, and provides direction and indicators of success for those who operate the organization. When the data used by planners and budgeters, however, is too different than the operational realities of the organization, then a disconnect can occur between the support functions and the operations of the enterprise. In fact, plans and budgets that are most successful deal with the products and services of the organization very directly, and provide specific targets and assumptions, rather than re-defining those efforts into financial or quarterly phenomena. Yet, there are times when the budget language of revenue or outlays may be very different than the language of operations, which may be about tangible things. Nevertheless, effective plans and budgets provide a clear link between money and things or resources and outputs.

A successful plan and budget will emphasize or, at least, take into account the operational reality of the functions of the entire organization, rather than focus exclusively on large scale metrics like profitability, market share, or size of budget. If they fail to do so, then arriving at an acceptable plan and budget may end up being more a negotiation about abstract numbers than a process to ensure accountability and coordinate actions. Even so, the nature of planning and budgeting is exploring what is possible and desirable, so there is a good bit of back-and-forth about what can and should be done by the organization. Since budgets are iterative, therefore, it can be difficult to know when they are complete, as opposed to being just the most recent version. When this sort of confusion exists, however, it can be difficult for managers to know what levels of performance they are actually responsible for, as opposed to just having another tissue paper target that is likely to be assumed away in the next version of the budget. (dz)

Viewpoint B

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Recommendations

  • Provide a clear link between money and things or resources and outputs. Plans and budgets should deal directly with the products and services of the organization while provide specific operating targets and assumptions, rather than re-defining those efforts into exclusively financial measures.
  • Tailor the granularity of measures to operational levels rather than strictly high level or macro measures.

Benchmarks

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Resources

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Implications

(1) Budget language is different than business language (2) Re-definition of products and services (3) Budget process focus on negotiation rather than facts (4) Budgeting in different terms than my operations (5) There is a correct amount of division of effort (6) Budgeting is iterative (7) Hard to know when budgets are done

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