Budgets have a bad rap. Just the word budget makes people cringe. People equate budgets with images of someone looking over their shoulder, losing their freedom, being restricted in their activities, or not being worthy of making a decision.
The “problem” with budgets is in the process or delivery of them, not the budget itself. If a budget is done well it becomes a yearly rallying point for your team. It creates buy in to the company goals, accountability throughout the year, and reasons for celebration!
Generally budgets are created by the accounting and finance department, and given to the rest of the team. This goes over about as well as your Mother telling you what to wear when you are 14. You are well beyond needing someone to pick out your clothes and you naturally feel resentful, and completely imposed upon.
Imagine this scenario instead: You are 14 and your Mom gives you $500 to build your wardrobe for the next 6 months.
Lets look at the possibilities. How can you participate in expanding your capacity to have more new clothes? What odd jobs in the neighborhood might you find to generate extra income? What do you have now that works, you like, fits and you want to keep wearing? What essentials, like underwear, are needed? Beyond the essentials, what other choices do you have?
Would you feel more empowered and engaged in this scenario?
Might you be more willing to work to make your wardrobe a source of pride?
Might you feel a sense of accomplishment in completing this exercise and executing it?
Of course, the answers are obvious. Then why do we continue to insist on a top down approach?
You can empower and energize your team in the same way. Start by involving them in setting acceptable and ideal goals for revenue. This is a great opportunity to educate everyone on how they contribute to revenue, and get their buy in on what is essential.
For example, at Mackey Advisors and Ignite Prosperity, all of our business comes from referrals. The willingness of a client to refer is directly tied to their level of satisfaction with their perceived value of our services. The service delivery team is key to building revenue and once they understand this fundamental fact, they can align their thinking and actions accordingly.
On the expense side of the budget, you can engage your team as well. Divide your budget into major categories, like marketing, fringe, overhead, etc. and give one person or a team the task of budgeting that area. Educate them on what has been done in the past, and give them the freedom to build a better result.
At the end of the day, there are some calls that you as the CEO will have to make. There are investments that have to be made to drive the business to the next level and you have to decide which of those are the right ones to take on. In addition, make sure to consider your risk, investment and business outlook to determine your personal goals for net income.
Once everyone given his or her input, bring it all together. Likely, you will be pleasantly surprised at the result. If things don’t quite fit and you have to cut, keep the communication open and make it a dialog so you continue to gain buy in.
Monthly, update your team on the results relative to budget and keep the communication open about how to improve and achieve your bottom line.
It is really this simple. Without education, training and input into understanding the company goals, how is you team expected to know when they are successful.
By taking the time to educate and involve your team in setting and achieving company goals, they understand clearly the success line, and their role in getting there and how they score. Which is the most powerful scenario? Which gives you as the CEO the freedom to focus on bigger strategic objectives that can take your company to the next level? The answer is obvious! So take the plunge and engage your team in the budgeting process.