16 August 2007

Getting the budget right

I've talked before about the problems of cutting costs in complex organisations. One of the things that I didn't mention is that arbitrary cost cuts can cause a good deal of internal debate as well as loss of morale.

I was reminded of this earlier today when two middle managers were describing the approach being taken to next year's budget. They were highly critical but were uncertain that there would be an opportunity to ensure that the cuts were made in what they saw as 'less essential' areas.

Whether those managers were right about the nature of the process, the fact that they have become emotionally committed to an outcome which is different from the existing proposal creates a loss of efficiency within the organisation. Budgetting processes need to be capable of bringing these middle managers along so that they can feel part of the process and accept the outcomes.

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