Budgeting, meanwhile, was an annual low-level department exercise, with no midyear updates. “That gap [between high-level strategy and budgeting] had to be bridged,” she says, a goal that “had to be understood at the highest levels of the organization, but also sold to the lowest levels.”
That required a sensitive touch with the zoo’s scientists and animal keepers. “You don’t want to overload your professionals with something they perceive to be bureaucratic number-crunching,” she says. “On the other hand, nobody knows that side of the business better than they do.” Six months into the job, Brock rolled out software by Timeline Inc. to pull data from the general ledger, and created templates for 145 departments. She limited the number of budget items in each department’s report, however, and offered extensive training. “A keeper in a primate exhibit doesn’t have many things on the list — but nobody knows that list better,” says Brock. Better yet, she adds, department heads now have an improved understanding of the collective impact of their decisions. A good B&P process, she explains, “by its very nature creates healthy discussions and buy-in.”
As APQC’s Willis suggests, it also speeds the process. Each department now does a close and reforecast within 7 to 10 days of the end of each month, and Brock is now working on a 13-month rolling forecast that will close the timing gap between the budget and the 10-year strategic plan, which is refreshed annually.
Making sure budgets are linked to overall strategy is essential, whether the organization is the not-for-profit Zoological Society or the world’s largest software company. Microsoft Corp., with 60,000 employees in 99 countries, tackles B&P on a much larger scale. But Marc Chardon, CFO of the company’s Information Worker business group, says Microsoft also has processes to ensure that the budgets of its seven businesses are based not only on their own product-development strategy, but also on corporate strategy.
At first blush, that would seem to be an enormous challenge. Indeed, Microsoft formally converted its various engineering operations into seven distinct businesses about two and a half years ago, in part because centralization had proved too unwieldy. Another problem was that those engineering groups — which produced Microsoft software — had no direct responsibility for sales, and so were “more focused on product than revenue,” observes Chardon. Distributing the once-independent field sales force into the P&Ls of the groups “made the matrix more complex,” he says, “but made the [business group] CEOs more accountable.”
At the time of the reorganization, then-CFO John Connors also proposed that each business group have its own CFO who would be responsible for that group’s strategy, business modeling and planning, and analysis of market performance and operating expenses. (CFO duties such as treasury, tax, investor relations, and corporate compliance remain centralized.)
Yet the “paradox” of running a company of Microsoft’s size, says Chardon, is figuring out the right balance between businesses that are returning cash (such as the Information Worker business) and those that are considered investments (such as Home and Entertainment). Such trade-offs even exist within each business, so that B&P “is right on the cusp” between centralization and decentralization.