Budgets May Have Lost Their Usefulness

Scott Briscoe's post in the Acronym blog takes a bold stance with regard to association budgets.  I agree with Scott that they may well have outlived their usefulness.  And that goes for capital budgets, too.  The impact of a large capital purchase on an Association's annual operating budget in the last month of one fiscal year or the first month of the following fiscal year is often negligible (although it does impact the balance sheet for that year).

A budget is only the financial portion of an association's annual business plan.  As Scott points out, it is often out-of-date and meaningless just a few months into the year.  Association staff and volunteers spend far too much time struggling with budgets and too little time analyzing their financial statements and adjusting strategies to take advantage of changing opportunities and mitigate emerging threats. 

Financial goals are also meaningless if they are based on some committee's idea of appropriate growth rates.  Growth will come from the disciplined execution on new strategies and innovations (some of which may fail; no pain, no gain).  I know very few association professionals who are motivated to work harder or actually achieve greater success because someone else sets an ambitious goal.

We should work to develop digital dashboards that allow managers at all levels to access real-time financial indicators (preferably lead rather than lag measures) and empower these managers to take action as necessary to fix problems and employ new ideas before the fiscal year ends and its too late to impact the bottom line.

Tagged: budgets lead indicators capital budgets digital dashboard 

Comments

[Jeff]

Rick, I think you can strike the "may" from your title. I have been thinking for some time now that associations should abandon budgets in favor of the kind of rolling forecasts advocated by the Beyond Budgeting crowd. I'm not aware of any associations that have abandoned budgeting, but I hope some organizations will soon adopt new methods for allocating resources more effectively to maximize innovation and organic growth.

Your digital dashboard sounds like a great idea. I'm concerned, however, that many association executives would not know how to use it well because we have not provided them with the kinds of learning and development opportunities that cultivate strong strategic judgment for leveraging resources.