A strong interest in the outcome of budgeting decisions, along with an increased demand for specialization, can result in having too many people involved in the planning and budgeting process.
Summary: Many people have an interest in planning in budgeting decisions because they can be impacted personally and professionally. An increase in available data has resulted in specialization and analysis becoming increasingly important in planning and budgeting. More...
Summary: Strong interest in the results of budgeting decisions creates potential for the involvement of too many people in the process. More...
Summary: Sometimes having more people participate is more than something managers "need to do" in their effort to prepare a better budget. The budget also offers opportunities for developing the staff. More...
While planning and budgeting may be among those topics that organizational members like best to complain about, the processes are also of great concern and interest to the participants. Lots of people throughout the organization care about the results of planning and budgeting activities because the results can affect their personal and professional interests. Targets are set, expectations are created, and organizational bets are made – all through decisions about planning and budgeting. For these reasons, people feel a need to participate in the planning and budgeting processes even though they are not always happy about how the processes are run or the results produced.
In fact, because organizations are now able to measure and record so much data about their own performance, and that of related organizations, processes and tools have been established for planning and budgeting that can take advantage of that data. Moreover, new perspectives and data require detailed analysis and decision making by specialists throughout the organization. When other members of the organization see their peers participating in seemingly important decisions through the planning and budgeting processes, they, too, want to participate. It becomes a mark of distinction by the larger organization to allow a particular member to participate in such deliberations. A danger, however, is that involving too many participants may bog down the planning and budgeting cycles. In addition, it is quite likely many of those involved may not have sufficient perspective to contribute meaningfully to the processes. (dz)
There is a “people” aspect to the budgeting process aside from the politics of budgeting discussed in other topics. The issues are more related to the process and role that people play in the process. Many people have an interest in the budget process and, more specifically, the outcome. This high level of interest can result in a large number of people wanting to participate in the process. If the planning and budgeting function is decentralized, there may be “too many” people involved in the process. This may be due in part to specialization throughout the organization that requires more people to participate. The tradeoff then becomes one between including participants with specific knowledge and an overly cumbersome process that involves too many people. (rb)
As organizations become increasingly complex, people become more highly skilled and/or focused on narrower aspects of an organization's operations; and few individuals may have the broad knowledge base to effectively and efficiently develop a budget. While high-level managers might be in the best position to think strategically about the budget, the mechanics of preparation and the preparation of preliminary budget requests might best be handled by those closer to the process, which makes it necessary to involve more people. Operating managers understand the details of day-to-day operations, and these details translate into resource demands, which should be rolled up into the budget. Upper management can then make the decisions on how to best align the requests for resources with the overall objectives of the organization.
But sometimes having more people participate is more than something managers “need to do” in their effort to prepare a better budget. Managers should recognize that the process of developing the budget also offers opportunities for developing the staff. There is little doubt that learning can take place through the participation process. Involvement in the budgeting process helps the participant learn about interrelationships that exist within the organization. The analysis of resource requirement also promotes a deeper understanding of changes in cost structure. An additional benefit is that a coordinated budgeting effort requires communication across the organization. Those involved in the coordinated effort get exposure to and interact with staff from other areas within the organization. Finally, part of involvement is getting commitment or buy-in, and participation should start at the lowest levels within the organization, which expands the number of people involved but helps build acceptance of the budget before the final version is prepared.
So, while lots of people care about the results of the budgeting process, managers should also care about the personal impact on the staff involved in the budgeting process. The skills developed in setting targets and communication, and the increased understanding of the organization and the interrelationships that exist, are invaluable in the development of staff careers, which makes increased involvement something that is the “right thing” to do. (pj)
- While natural and political inclinations may push to include more people in the process, focus on the stakeholders who have input and accountability in the Planning and Budgeting process.
- Focus finance employee development to hone strategic partnering skills. Copied from Comunication section
- By placing more emphasis on training and development, leading organizations are better able to execute business plans. Moreover, this approach enables the finance function to be viewed as more of a strategic business partner for the organization.Copied from Communication section
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(1) Lots of people care (2) Politically correct to include more people rather than less people (3) Specialization requires more people to participate (4) Budget responsibility at too low a level (5) People feel a need to participate in budgeting (6) Everyone has an interest in the budget