Budgeting is a corporate game people play. It consists of politics, negotiation, and top-down opinion. Budget becomes what a CEO wants.
Budgeting is not about sales, costs and profits. These are outcomes, lag measures.
Budgeting is about lead measures – inputs - allocation of capital to strategic projects that will drive performance.
CEOs must own budgeting.
They must articulate their understanding of what drives of sales, costs and profits. Example:
And then coherently identify lead measures that create financial metrics for all to see.
In an experiment I did, managers were unable to identify how they assessed their work (lead indicators) to assess whether they were on track to meet budgets (lag goals).
Budgets what a CEO likes, divorced from the realities of the market is a game of micro-management of revenue and costs
A budget then is a CEO palliative, and an illusion.
Budgets are first about strategic cash deployment then about revenue