Gregory V. Milano

The dark cloud hanging over the budget process is that people know they will be measured against the plan, so they aim low to increase their chance of success. They plan for mediocrity. The decision to tie rewards to budgets has done more damage to American industry than any decision in history.

The budget process is typically focused on current-period profit and loss drivers, with almost no regard for future growth. This generates a behavior problem. If you only track the first half of the current operations value/future growth value equation, the tendency will be to sacrifice the drivers of future value to push up current value. This is the incompleteness of the budget process. It neglects future growth value, and it’s a terrible problem.

Like this content? Why not share it?
Share on FacebookTweet about this on TwitterGoogle+Share on LinkedInBuffer this pagePin on PinterestShare on Redditshare on TumblrShare on StumbleUpon

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.