Budgeting Presentation
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The document discusses budgeting concepts and frameworks. It provides 3 key points: 1) Budgeting serves two major roles - to provide real-world constraints for strategic planning and allocate resources to realize strategic plans. This enforces accountability. 2) Effective budgeting requires alignment across the organization's business model, strategy, structure, culture, leadership, and resources. A four-wheels model is presented to illustrate this. 3) Budgeting priorities must be set based on each discipline's focus - whether operational excellence, product leadership, or customer intimacy. Managing gaps between actual and planned budgets also requires flexibility, reserve funds, and prioritizing investments based on market potential and business performance.
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Budgeting Presentation
- 1. BUDGETING: Case Study, Concepts and Debatable Ideas by Ambassador Tal Edgars
- 2. Summary: Today’s presentation 1. Done Business Model 2. D Done Strategy 3. Done 3 Alignment 4. 4 Budgeting
- 3. Budgeting The art and science of allocating and aligning Resources to g g strategic plans
- 4. Budgeting: Some thoughts… Two major roles of Budgeting: 1. 1 Provide real life CONSTRAINTS to strategic planning real-life 2. Provide RESOURCES to realize strategic plans Why Constraints? 1. Over aggressive unrealistic planning, usually by Marketing/Sales need to be grounded to real life 2. Creative entrepreneurial thinking when resources are limited 3. Enforce the need f A 3 E f th d for Accountability i.e. ‘ROI’ thinking t bilit i thi ki for all Managers
- 5. Alignment: 4-Wheels Model M d l Business Person Structure Model Strategic Planning Culture Leadership Resources
- 6. Alignment: Framework • Focus point Culture C lt • Alignment • Quality • Innovation & Differentiation • Risk taking Ri k t ki g • Performance Management • Corporate obsession • Decision making
- 7. Alignment: Framework • Org Structure • Job Design Structure • C&B • Policies & procedures p • Decision making • Job fit • Management Systems • BSC and KPIs • Decentralized & Empower
- 8. Strategy: Framework • Role modeling • V s o M ss o Vision/Mission/Philosophy losop y Leadership • Leadership Style • Delegation & Empowerment • C&B, Promotions • Sense of Urgency • Speak regularly about p g y Performance
- 9. Strategy: Framework • Recognition • Recruitment Person • Training • Profit sharing • Values • Motivation • Self Efficacy • Awareness • Useful Competencies • Career aspirations • Attribution (control)
- 10. Strategy: Framework Enablers • Technology Resources • Equipment Funding • M t i l Materials • CAPEX • OPEX • Human • Intellectual p y Property • Partners • Property
- 11. Alignment: 4-Wheels Model M d l Business Person Structure Model Strategic Planning Culture Leadership Resources
- 12. Each Discipline Requires Different Priorities & Resources Organization, jobs, skills Culture, values, norms Operational Product Customer Information and Excellence Intimacy systems Leadership Management systems
- 13. Each Discipline Requires Different Priorities & Resources Operational Excellence Organization, Organization •Central authority, low level of empowerment authority jobs, skills •High skills at the core of the organization Culture, values, , , •Disciplined Teamwork Disciplined norms •Process, product- driven •Conformance, 'one size fits all' mindset Information and systems •Integrated, low cost transaction systems •The system is the process Management •Command and control systems •Quality management y g
- 14. Each Discipline Requires Different Priorities & Resources Product Leadership Organization, jobs, •Ad hoc, organic and cellular skills kill •High skills abound in loose-knit structures Culture, values, C lt l •Concept future driven Concept, future-driven norms •Experimentation and 'out of the box' mindset Information and •Person-to-person communications systems P t i ti t systems •Technologies enabling cooperation Management •Rewarding individuals' innovative capacity systems •Risk and exposure management •Product Life Cycle profitability
- 15. Each Discipline Requires Different Priorities & Resources Customer Intimacy Organization jobs, •Empowerment close to point of customer contact Organization, jobs skills •High skills in the field and front-line Culture, values, Customer driven •Customer-driven norms •Variation and 'have it your way' mindset Information and I f ti d •Strong customer databases, linking internal and systems external information •Strong analytical tools Management •Customer equity measures like life time value systems •Satisfaction and share management •Focus on ‘Share of Wallet’
- 16. Managing Gaps between actual and planned budgets 1. Budgeting vs. Priorities 2. Basic Budgeting policies 3. Activity Grid to determine budget priorities 4. 4 Budgeting for Investments based on the ‘BCG Matrix’ principles
- 17. Budgeting vs. Priorities Priority = Time + Money
- 18. Budgeting vs. Priorities Example: Business Situation vs. R&D P i i i E l B i Si i Priorities Upturn Flat Downturn Fight Complacency Innovation Sales Sharpen Edge Acquire Cash Flow Keep Momentum Profits Conquer Build momentum NPD Cycle Time Focused on F d Improve Top 15% ‘Breakthrough’ Improve Edge revenue-generating JV, In-source, Out- , , p products Extensions source Counter Competitor Eliminate bottom 20% ↓ R&D, ↑Sales
- 19. Basic Budgeting policies • Flexibility to switch between line items • Reserve Funds • Loans/External Funding
- 20. Activity Grid to determine budget i iti b d t priorities Increase (↑) Create (+) What are features/ What are features/ activities/services to activities/services to increase? introduce? Reduce (↓) Eliminate (-) What are features/ What are features/ activities/services to activities/services to reduce? eliminate? 1. Manage conflicts where limited resources should go 2. Solve problem of compounding activities & resources
- 21. Budgeting for Investments based on the ‘BCG Matrix’ principles p p Market Potential Business Performance
- 22. How to maximize Budget? 1. Align budget to priorities 2. 2 Integration of businesses and functions for teamwork 3. Do practical, implementable stuff that bring real results (hard work) g ( )
- 23. Budgeting in a Downturn
- 24. Budgeting in a Downturn
- 25. Budgeting in a Downturn
- 26. Budgeting in a Downturn