The Ritual Rain Dance around the Annual Budget

The corporate rain dance around the budget

Over the last few months, I have spent some time understanding the concept of Beyond Budgeting (BB) and its relationship to what we call Agile Lean Leadership (ALL) – creating a constitutional organization, where there is freedom under the rule of law and not the law of the ruler.

I have met with Bjarte Bogsnes who was generous enough with his time to explain to me the fundamental concepts of BB in detail. It has become clear to me that we are almost perfectly aligned on the values that we want to achieve and the diagnosis of what is holding most organizations back.

As the name suggests, BB’s proposal is first of all to get rid of the classic yearly budget, with its damaging mixing of goal setting, forecasting, and allocation of resources into one giant plan, and to make things worse it is supposed to cover a full 12 month period in detail. These should be split into three different processes and run with much shorter iterations.

The classic budget assumes stable knowledge and environments so that the state of affairs 12 months out in the future can be discerned. I think everyone knows this is not the case, but most organizations do it nonetheless. This may have been true sometime in the last century, but in today’s complex world – also called VUCA – it is completely unrealistic.

It is a corporate ritual that is performed every year, and apparently with every participant hating it. But it is a ritual rain dance that provides the illusion of control, and it seems that most don’t dare to touch the ritual for fear of the unknown or breaking rank.

It made me remember some wise words of Russell Ackoff: “A good deal of the corporate planning I have observed is like a ritual rain dance; it has no effect on the weather that follows, but those who engage in it think it does. Moreover, it seems to me that much of the advice and instruction related to corporate planning is directed at improving the dancing, not the weather.”

There are better ways if you want to embark on a journey towards agility and resilience. Talk to the folks a BB if you want to start with your corporate processes and deal with the budgeting, aligning it all to the situation at hand. Talk to us if you want to start with your teams and the value streams, preferably starting with your customers. Or even better talk to us together and let us help you develop a holistic view and engage your people in an improvement process.

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