Speech Abstract

In the budget process, you're supposed to allocate scare funds to the best investment opportunities. But how can you judge the ROI on compensation, travel, and training? You can't! The truth is, traditional budget processes may limit spending, but they do little to assure the proper allocation of resources.

The alternative — termed "Investment-based Budgeting" — treats every department as a business within the business. It mandates a powerful new format for budget submissions: departments plan the costs of the products and services they hope to "sell" internally as well as to external customers.

Then, budget decisions are based on which products and services the enterprise will buy from each department.

With improved financial transparency, executives have far greater control of spending. Instead of arbitrary benchmarks like last year's budget or haphazard haggling over cuts, funding is decided based on the value of proposed deliverables.

Investment-based Budgeting cuts waste by eliminating low-value deliverables — not by crippling the organization with arbitrary limits on certain expense codes which may, in fact, be needed for key strategic initiatives.

It aligns expectations with resources, since the budget process defines exactly what each department is supposed to deliver in the coming year. By focusing staff on key deliverables, delivery improves in every department.

It aligns departments with strategies, since all the pieces of a strategy enterprisewide are funded. This improves teamwork and strategy execution.

In short, Investment-based Budgeting enhances shareholder value.

This presentation explains the shortcomings of traditional budget processes, how Investment-based Budgeting works, and a practical way to get started.

100-word version....

50-word version....

Outline

• Traditional budget approaches

• Poor allocation of scarce resources

• Undermines strategic alignment

• False expectations of productivity gains

• Inappropriate micro-management

• The alternative: Investment-based Budgeting

• The benefits

• Implementing Investment-based Budgeting

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