27 September 2012

Down with Budgets!

And I'm not the only one who thinks so.

Example one: a recent discussion on the ASAE Collaborate executive list about trying to balance the annual budget cycle with making room from innovation. 

Example two: this week, Jeff De Cagna did a webinar on his new e-book Associations Unorthodox. It focuses on six radical changes Jeff recommends associations make to position ourselves for the future. Shift #3? "Eliminate budgets."

The problems with budgets (at least as we currently construct them) include:
  • They're mostly backwards looking, based entirely on what happened last year, plus or minus a few percentage points.
  • They're constructed and approved sometimes as much as 18-24 months before the money allocated it actually going to be spent. 
  • They treat estimates like certainties, and then allocate every penny of expected revenue.
  • We use them to evaluate staff, holding our teams to meeting our budgets to the penny, and evaluating them on how well they do. 
Extra revenue or less expense is always OK, of course, but extra expense? Even for an amazing opportunity or really important strategic investment? Well, you'll just have to wait until the next budget cycle comes around. 18 months later, when you can actually spend the money, the opportunity has flown.

Why do we act as if budgets are set in stone? Why don't we treat them as an estimate that's open to revision based on changing circumstances? Or, as Jeff suggested, allocate some buckets of money to be spent on our organizations' top strategic priorities, then leave it up to the staff and volunteer leaders responsible for those priorities to figure out what are the best investments in programs, products and services to meet those priorities?

Of course, that requires that you have ways of measuring the success or failure of what you're doing other than "we met/didn't meet budget this year."

Did I just answer my own question?

Image credit: OppSource


Eric Lanke said...

"Why don't we treat them as an estimate that's open to revision based on changing circumstances?"

Some associations do. I'd be curious to see an authoritative poll on this question. How many association are really hamstrung by their budgets?

Elizabeth Engel said...

Of the three associations I've worked for directly, two were and one wasn't. Clients? More "can't do it - not in the budget" than the opposite. But maybe that's an excuse?