Roles

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Participants in the planning and budgeting process general serve specific roles based on their specialized knowledge or position in the organization. Because there can be many people involved in the process, the roles of individuals should be clarified and managed to keep the process from becoming to unwieldy.

Viewpoint A

Summary: The involvement of participants from finance and operations is important to the budgeting process, including identifying the appropriate individuals to be involved. More...

Viewpoint B

Summary: Roles in the planning and budgeting process are generally based on specialization, tasks to be performed, and level within the organization. Roles should be specified and coordinated by the dictates of the planning and budgeting processes. More...

Benchmarks, Resources, Recommendations, Implications

Viewpoint A

A common frustration in the budgeting process is that too many people are involved, with unclear roles, and disconnected purposes. When there is a disconnect between financial players and operational players in the budget process, both views/parties must be partnered for validation, feasibility, and communication.

When the financial players are integrated partners with the operations budget owners, one can begin to address the issue of too many levels being involved. Those that can provide value-added input to planning and budgeting decisions as well as those that can impact budget decisions should be involved. A clear focal list for each product/service and/or region is a method for ensuring the right numbers of focals are engaged, at the right level.

A solution is also to implement a planning directive via a centrally run planning group. The solution also provides for one central master source and controller of change configuration via the central planning group. (ss)

Viewpoint B

Budgeting and planning require a division of labor among the participants just like other business processes, and so the different steps of those processes require specialized roles. Since plans and budgets are tied to the fiscal year, roles are driven, in part, by the types of tasks necessary to move business decisions through the annual process. In addition, since plans and budgets require approval at higher levels and are carried out at lower levels of the organization, the hierarchical nature of governance also drives different types of roles. Therefore, there are roles based on (1) specialization, (2) tasks, and (3) level.

Specialization is often driven by the fact that different participants have exclusive or special knowledge of data, such as production functions, cost drivers, revenue estimations, customer expectations, supplier concerns, and so forth. Tasks in planning and budgeting tend to progress from the more speculative and unconstrained (during strategic planning) to the concrete and specified (such as execution based on budget allocations and targets). Some participants fill roles predominantly during the early, “soft” stages of the processes, while others are experienced technicians familiar with operational considerations. Participants may also have a great deal of responsibility for moving the process forward by issuing high-level decisions, while others focus on providing critical data, perspectives, and analysis to support recommendations and decision-making. Considerations about level may also determine the degree to which the public at large is exposed to the plans and budgets of the organization. Typically, the highest rung of the organizational ladder determines and executes public relations, while lower levels tend to guard non-public working information and proprietary data.

This wide array of roles needs to be specified and coordinated by the dictates of the planning and budgeting processes. If the processes do not include clear definition of roles and responsibility, then confusion may reign. Observers and participants may think that too many people are participating in the process, or that the wrong people are participating. However, since unanticipated events and requirements may enter into the process, the processes and roles should not be captive to prior expectations. Therefore, if roles are not communicated clearly, or are not suited to the immediate needs of the organization, then confusion and frustration can result.

Once roles are agreed upon, then the rules of engagement among the participants also have to be specified and either imposed or otherwise agreed upon. If the rules for how individuals relate to one another, to the requirements of the processes, and to the data that comprise those processes are not sufficiently clear, then the system can bog down.

Some participants in planning and budgeting are at the core of these processes. Their jobs are to make the planning and budgeting processes themselves function. They are primarily responsible for the success or failure of the organization’s planning and budgeting processes, and so typically also have a great amount of responsibility for determining the rules, roles, data, and steps of the processes. Other participants are not centrally driving the planning and budgeting processes, but they are important players. They may have valuable information, perspectives, or jobs to do that significantly impact planning and budgeting decisions, or they may have primary responsibility for carrying out decisions arrived at via planning and budgeting. Yet another, and larger, group of organizational members indirectly affect the processes, and may be only indirectly impacted by them. For this last set of individuals, the planning and budgeting processes are infrequent and often unwelcome intrusions on their “real jobs,” for which the organization holds them centrally responsible. It is this last group where lack of clarity may be highest about the processes because outreach efforts may get to them. How large these groups should be, the “core,” the “players,” and the “observers,” depends on the needs of the organization. For dynamic organizations, or organizations that operate in a highly dynamic environment, planning and budgeting may require more participants, or more activity from participants, than more quiescent organizations. The level of effort and participation is often a matter either of benchmarking to similar organizations, or, more commonly, based on the unique experience of the organization from past periods of planning and budgeting. (dz)

Benchmarks

Business Drivers

  • Value analysis of FTE activity for the profitability and cost management cycle.
  • Activity analysis of FTEs for the process "perform planning/ budgeting/ forecasting."
  • To what extent the corporate board is involved in modifying and approving the business entity's budget.
  • Strength of the relationship between budget and corporate strategy.
  • How well cost behavior is understood by line management at the business entity
  • How well cost behavior is understood by senior non-finance management at the business entity.
  • How well cost behavior is understood by senior finance management at the business entity.
  • Budgeting and forecasting techniques used by business sites.
  • Items which are included in the budget.
  • Percentage of time spent budgeting controllable versus non-controllable expenses.
  • Budget elements whose change impacts the preparation of new forecasts.
  • System/software used for the process "perform planning/ budgeting/ forecasting."
  • Whether the business entity has eliminated the annual budget process

Leading Practice Statements

  • Focus planning on regular operational planning activities
  • Focus finance employee development to hone strategic partnering skills.
  • Leverage business performance management systems (BPM) to strengthen links between roles, strategic objectives and performance. For best results, assign the best people to design, implement, and manage performance measures.
  • To achieve buy-in, involve all stakeholders in the development of roles and corporate performance measures.
  • Use cross-functional teams to map long term financial needs
  • Use cross-functional teams to map long term financial needs

Metrics

  • Average personnel cost per FTE for the process "perform budgeting/planning/forecasting."
  • Number of FTEs for the process "perform planning/ budgeting/ forecasting" per $1 billion revenue.
  • Number of FTEs for the process "perform planning/ budgeting/ forecasting" per $1 billion cost of continuing operations.
  • Cycle time in days to complete the annual budget cycle in the most recent fiscal year.
  • Cycle time in days to complete the financial forecast.

Resources

  • Your input is welcome here.

Recommendations

  • Formally define roles and responsibilities for all portions or steps of the process.
    • See Viewpoint B for discussion of the spectrum of roles and responsibilities.
  • Roles and responsibilites could be developed via a consensus or by a directive from a central authority.

Implications

(1) Too many people in the process (2) Roles can be defined, assigned, and enforced (3) It is valuable to have clear roles (4) What is the “right” number of people (5) There is a correct number of people to be involved (6) Lack of clear roles and responsibilities (7) Overly rigid roles and responsibilities (8) Confusion over roles (9) There are rules that can be made clear (10) Rules should be made clear before starting (11) Rules exist that are agreed upon (12) Unclear rules (13) Organizations, not processes, rigidify roles (14) Takes away from people doing their “real job” (15) Users and audiences are not always clear (16) Truth is relative to one’s role (17) What is the right work for the right people? (18) There is a right number of people (19) Requires more dedicated and specialized staff (20) It is valuable to have clear roles (21) Implies an optimal amount of participation (22) Do we know how many it takes? (23) What do you want me to focus on? (24) Amateurs drive it to the lowest common denominator (25) Amateurs run the budget process (26) Amateurs participate in the process

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