The Planning Peril




Redesigning the budgeting function? Avoid built-in risks.

The Planning Peril


  • A REDESIGN OF YOUR organization’s planning and budgeting process is a risky business—for you and your company. Reasons:
    • If the redesign lacks support and fails to deliver, the finger will be pointed at the highly visible redesign team.
    • There’s always a natural tension between senior management and operating managers. Usually, the senior team pushes for higher revenues and lower costs, while the operating managers try to lower expectations. These negotiations bring politics into the process.
  • MOST COMPANIES FOCUS ON how to spend less time on planning rather than on how to improve effectiveness.
  • RECOGNIZE THAT THERE are no silver bullets—a one-size-fits-all solution.
  • TOO OFTEN MANAGEMENT turns to technology as the solution. It rarely works.
  • IT’S IMPORTANT TO BEGIN by identifying the strengths and weaknesses of the current system. That’s about the only way to establish solid footing for a redesign.
  • BE SURE TO SOLICIT the views of a cross-section of the organization; without companywide input it’s unlikely the new process will get support.
LAWRENCE B. MacGREGOR SERVEN is a principal with the Buttonwood Group LLC, Stamford, Connecticut, and the author of Value Planning: The New Approach to Building Value Every Day, published by J. Wiley & Sons, 1998. His e-mail address is .

ongratulations! You’ve just been picked to be part of a team to redesign your organization’s planning and budgeting process. This is your chance to be a star and make a significant upward career move.

Or is it?

As a corporate planning veteran, here’s my viewpoint: Any effort to undertake a redesign is studded with land mines, both professional and personal. Such projects often fail, and they’ve also been known to dead-end some promising careers. So tread carefully—and read on for suggestions on how to maneuver around those mines.


First, let’s look at why the revamping process is so perilous.

Exposure. The budget process touches nearly everyone in an organization, especially top management. And if the new plan lacks widespread support and fails to deliver what it promises, an accusing finger will be pointed at the highly visible redesign team.

Expectations. There’s always a natural tension between senior management and operating managers. Usually, the senior team pushes departments to boost revenue and cut costs, while the operating managers try to negotiate lower, more-realistic expectations. The tug-of-war negotiations frequently inject a certain amount of politics into the process. A recent CFO Magazine survey disclosed that two-thirds of management respondents thought politics more than strategy drove their companies’ budget process. Redesigning the budget planning methodology can be emotionally charged as a result.

Denial. Many managers wish the planning process would just go away. Since seminars and articles on the budget process often focus on how to save time rather than on improving effectiveness, top managers tend to believe that the whole procedure is little more than a necessary evil. If that’s the pervasive belief in your company, it will be tough to get support.

So what can you do to improve your chances?


For every planning redesign success story—whether it applies to rolling forecasts, continuous planning or activity-based budgeting—there are a dozen failures. As a management consultant for many years, I can say without question that there is no one-size-fits-all solution. Prefabricated solutions address only the more superficial aspects of planning, not the root issues that most frequently undermine it. Such issues usually include, among other things, a widespread lack of accountability, ambiguous goals and objectives, insufficient linkage between long-term strategy and short-term operating plans and—the one omission that drives a stake through the heart of any plan—a lack of personal incentives to achieve planned goals and objectives.

Perhaps the most widely accepted cure-all for a bad planning and budgeting process is technology—that is, an expensive software program—and it’s often the first to be prescribed. The CFO of one of the country’s largest pharmaceutical companies found out the hard way that new software doesn’t provide an automatic fix. After one particularly rough annual planning cycle, a third of the finance team was ready to quit, complaining of 16-hour days for weeks at a stretch. After going through dozens of plan iterations only to wind up with a budget that nobody could support, they were demoralized. They believed that nobody outside the finance department took the planning process seriously, and that most managers viewed it as little more than a horse-trading exercise. In addition, the operating managers complained they were being taken away from their real work to spend time on make-work.

Frustrated, the finance group concluded that the problem was really about technology, and that state-of-the-art budgeting software would solve their problem.

They were wrong. Even with the new technology, the next year turned out to be worse. Not only did the finance team have to contend with the same old problems but, in addition to all their other concerns, they had to learn a new, complex (and temperamental) budgeting system, too.


It’s always struck me as ironic that as data-driven as finance professionals are, they have a tendency to jump into redesigning a planning and budgeting process before they adequately identify its strengths and weaknesses.

Performance measures not only provide a benchmark, they can help uncover issues and establish the requirements for a redesign. Most important, they create a mandate for change, which helps allay concerns that the call for a redesign is politically motivated. Only hard data—well collected and thoughtfully analyzed—can effectively show that a redesign is truly needed and that it’s not a device to criticize (and thus undermine) the current management team.

The challenge most redesign teams face is the lack of effective performance data. Countless cost measure surveys (that is, the number of people and dollars involved) have been done, but very few measure effectiveness by gathering hard data about the efficacy of the planning process. This preferably is done by surveying a cross-section of an organization’s managers. For more on a survey designed to measure the gap between what an organization needs and what it has, see the sidebar “How to Create a Planning Effectiveness Survey.”

Be sure the effort gets sponsorship from managers high enough in the organization to put the best interests of the entire enterprise above the interest of a few. Try to avoid disproportionate input from those biased in favor of one segment of the organization.

Keep the redesign team small: Put an upper limit of eight—but fewer is even better.


When people will be affected by a process they have had no hand in crafting, they tend not to give it wholehearted support. As obvious as that fact of human nature is, it’s often overlooked at great expense. To avoid that problem, strive to give everyone—or as many as practical—a voice in redesigning the process.

In addition to a survey, use a mix of one-on-one interviews and focus groups. After the first draft of the redesign, hold validation sessions across the organization to give people a chance to learn about the proposed changes and voice their concerns. You may even want to set up a Web site where staffers can express their views.


Be sure you pin down how you intend to measure the redesign’s success. Rather than get caught in a situation where the bar keeps being raised without explicit agreement, push to clearly define it at the outset.

Business planning professionals hear about the raised-bar syndrome all the time. A company decides to redesign its process because everyone feels the procedure takes too much time and delivers too little value. Success initially is defined as streamlining the process, and the redesign team comes up with a proposal that theoretically trims weeks off the planning cycle. The plan sounds good and everyone is happy—for a while. In time the mood changes and people return to ask about the relevancy of the project—and suddenly the program is in jeopardy.


How does your company really view planning? This is an important question because it frames the scope of the project. If it sees planning as simply a game about negotiating expectations, the proposed solution becomes essentially an effort to renegotiate expectations and rationalize shortfalls.

Chances of developing a workable planning process improve if management recognizes that planning and setting goals are an integral part of running a business, which includes assessing the resources required to achieve stated goals and track progress along the way.

Planning redesign projects have high visibility. Done correctly, they can dramatically transform a company and have an enormous impact on shareholder value. Yet very few initiatives have so much potential for both success and failure. Recognizing this up front, and being aware of the risks and how to handle them, will put the odds decisively in your favor.

How to Create a Planning Effectiveness Survey
Here are steps for conducting a survey to assess what to include in a planning and budgeting process redesign.
  • You’ve heard it before: What gets measured gets managed. So the redesign team should begin by clearly defining what it wants to measure. Since that determines where the business will put its efforts, choose carefully.
  • Make a list of attributes and ask respondents to assess the level of importance and the current performance level of each attribute. Attributes with a high value of importance and a low level of performance are the ones that should get priority.
  • Use outside benchmarks wherever possible, because the one thing you can count on is debate about the meaning of the survey results. When you use internal assessments, seek to substantiate them with outside guidelines. Sources for benchmarking data include trade associations, magazines and consulting firms. My organization, the Buttonwood Group LLC, conducted a national survey in conjunction with CFO Magazine on the effectiveness of the budget planning process; that information is available on request.
  • Select the distribution list for respondents: The goal is to survey a cross-section of the organization. Include senior and mid-level management, finance and nonfinance professionals as well as headquarters and field personnel. Look for variations in perception across these constituencies. The differences are frequently the most revealing part of the assessment.
  • In analyzing the results, focus on the most important attributes that also got high performance-level ratings. Look for surprises and patterns. Do findings relate to what was discovered in interviews and focus groups?

Here is what one part of a four-part sample survey looks like. The answers to these questions become more valuable when they are compared with national benchmark results.

Perceptions of the Current Planning Process
For each of the following comments, please provide a score based on your current planning process:

1 = Strongly disagree
2 = Somewhat disagree
3 = Neither agree nor disagree
4 = Somewhat agree
5 = Strongly agree

  Comment Score
B1 Strategy drives our planning process  
B2 Functional managers are held visibly accountable for achieving the plan  
B3 We have all the information we need, when we need it, to build good plans  
B4 The planning process is widely embraced as a “management” tool to drive results  
B5 Business unit goals and objectives clearly cascade down into functional and individual objectives  
B6 Performance targets are clearly linked to incentive pay for senior management  
B7 Performance targets are clearly linked to incentive pay for mid-level management  
B8 The value of the planning process clearly outweighs its cost in time and effort  
B9 We continually monitor plan performance (actual vs. plan results)  
B10 We take corrective action as required to ensure we meet key plan objectives  
B11 Finance provides valuable decision support to functional areas in preparing their plans  
B12 The purpose and value of planning is widely understood throughout the organization  
B13 We consistently meet our plan targets and objectives  
B14 Overall, most people are completely satisfied with our planning process  


Year-end tax planning and what’s new for 2016

Practitioners need to consider several tax planning opportunities to review with their clients before the end of the year. This report offers strategies for individuals and businesses, as well as recent federal tax law changes affecting this year’s tax returns.


News quiz: Retirement planning, tax practice, and fraud risk

Recent reports focused on a survey that gauges the worries about retirement among CPA financial planners’ clients, a suit that affects tax practitioners, and a guide that offers advice on fraud risk. See how much you know with this short quiz.


Bolster your data defenses

As you weather the dog days of summer, it’s a good time to make sure your cybersecurity structure can stand up to the heat of external and internal threats. Here are six steps to help shore up your systems.