International Budgeting Expert to Visit NZ
International Budgeting Expert to Visit New Zealand with “Budgeting is dead” message
14 September 2004
The international expert on budgeting, Jeremy Hope, co-founder of the Beyond Budgeting Round Table, is making a return visit to New Zealand in October.
“I’ve noticed a shift in attitude”, he said in an interview from England.
“There is a growing acceptance that the fixed budget is no longer useful to modern managers in the information age.
“Also there is much more interest in the alternatives because managers are seeing that these are better tools.
“I am referring here to rolling forecasts, new asset management techniques, and the various breakthroughs in performance management.
“It is now possible for managers to see how they can be flexible, retain control, and improve performance.
“Until recently, knowing that the traditional budgeting process was a waste of time and money, was frustrating, because the idea of doing without a budget was frightening.
“There are now alternative tools available, which are being widely used and business leaders can see that they work.
There’s also been more horror stories in the media about the effects of the traditional budget cycle on managers’ behaviour and the consequences this has for the public.
Simon Caulkin’s stories in the Observer newspaper in the UK are one example.
Jeremy Hope is presenting seminars on some of these new techniques in Auckland and Wellington in partnership with David Parmenter, an international expert in performance management based in New Zealand.
“So long as the budget dominates business planning a self-motivated workforce is a fantasy, however many cutting-edge techniques a company embraces”, Jeremy Hope said in his seminal article in the Harvard Business Review of February 2003
“There is an answer, throw the annual budgeting cycle out,” David Parmenter of the New Zealand performance management company, waymark solutions, writes in an article on the budgeting process that was published in the Chartered Accountants Journal April 2003 “Throw away the Annual Budget -the annual budgeting cycle takes too long and is not linked to strategy, strategic outcomes or critical success factors”, and “Abandon Budgets and set your enterprise free” Management Magazine October 2003.
“We are often asked, what should companies do instead of the annual budget? Quarterly rolling forecasts, going out 18 months, are the foundation stone. This and other techniques will be covered in the seminars Jeremy and I are holding,” Mr Parmenter said. Seminar dates are:
Wellington 11 October 2004 at the Duxton Hotel Auckland 12 October 2004 at the Hilton Hotel
Mr Parmenter said that the seminars were an opportunity for organisations to radically rethink their budget process to provide a system that is more flexible, is linked to strategy, improves management of finances and saves time.
Jeremy Hope made a very successful visit to New Zealand in November 2003, when he presented to corporate and government audiences in Auckland and Wellington, promoting the “beyond budgeting” message.
Jeremy Hope MA FCA is recognised as the world authority on a new management model that removes budgeting and other fixed annual performance contracts.
He is co-author of “beyond budgeting” “Competing in the Third Wave” and “Transforming the Bottom Line”, all published by the Harvard Business School.
The research director with Beyond Budgeting Roundtable, he previously worked in the venture capital business with 3i and spent ten years in business management before becoming an independent international consultant, author, and speaker.
David Parmenter, the CEO of waymark solutions, is an international business presenter and a leading expert in the development of winning KPIs, a new approach to performance measurement.
David has worked for Ernst & Young, BP Oil Ltd, Arthur Andersen, and Price Waterhouse. He is a fellow of the Institute of Chartered Accountants of England and Wales, a member of Institute of Chartered Accountants of New Zealand and a regular writer for management and accounting journals in a number.
Media inquiries to John Bishop on 04 475 8650 and 025 482 247 please
Other inquiries to David Parmenter of waymark solutions on 04 499 0007
Extract from Simon Caulkin’s article in the Observer Sunday 21 March 2004
Needed like a hole in the head.
Every year at this time, traffic grinds to a halt in London and other big towns as the streets sprout holes, stop signs, cones, piles of sand, and other paraphernalia of the March roadwork festival. Is this some mysterious urban rising of the sap, a mechanical equivalent of Wordsworth’s daffodils or the arrival of swallows in spring
Well yes and no. The plague of roadworks is indeed linked to the seasons, in this case the end of the financial year.
Later he continues
Surely budgets are a fact of life, whether for governments, big companies or the smallest tiddler? Budgeting, planning and monitoring against the plan is what managers do. It is management – or at least a version of it.
We shouldn’t be so tolerant. In all the (long) list of dubious management practices, none is so incontrovertibly an emperor without clothes as budgeting. Its effects are deeply corrosive on both sides of the organisation. On the spending side, every budget-holder spends to the limit in the last few months of the year to make sure they can ask for the same amount next year.
In other extracts Caulkin states
Not surprisingly, budgets create despair and misery for many thoughtful managers, as well as massive organisational cost.
Despite the disadvantages, for most managers, the idea of doing without budgets is a scary one. No budget – how do you exert control?
Actually budgets give the illusion of control not the reality. Managing the business to force-fit a set of pre-determined numbers is the wrong way round. Instead, the aim should be the use processes and measures that help the business to adjust dynamically to changes in the real world.
Background on the Hope/Parmenter Seminar series
1. Breaking Free from the Annual Performance Trap – Jeremy Hope A recent McKinsey study concluded that the difference between poor and excellent performance management practices mattered more than anything else to the long-term health of an organisation. The way most organisations set annual targets and reward people leads to fixed contracts that are complex, inflexible and lead to gaming and other dysfunctional and unethical behaviour. This workshop introduces a range of new practices that enable organisations to break free from the annual budget process and other annual projects.
2. New Thinking on Key
Performance Indicators – David Parmenter
For years many organisations have used what they thought were key performance indicators (KPIs). Often they have not had the impact they were seeking. KPIs themselves are mislabelled and misused. Organisations with over 20 KPIs lack focus, lack alignment and underachieve. There may only be 5 to 8 true KPIs that should be measured 24/7 or daily. This workshop will show how performance measures are divided into three types: key result indicators (KRIs), general performance indicators (PIs) and KPIs. Choosing the right mix of each type is crucial to effective measurement and control.
3. How to identify, measure and eliminate hidden costs – Jeremy Hope Most organisations carry huge amounts of costs that are unnecessary but invisible to the accounting system. From the costs of employee and customer turnover to hidden discounts and layers of unnecessary factory and back office controls, these hidden costs can amount to 30-40% of fixed costs. This workshop will show how to lift the veil on these costs and begin to eradicate them.
4. How to Implement a Quarterly Rolling Forecast programme that improves behaviour and performance – David Parmenter As the future becomes ever more unpredictable, there has been a surge of interest in rolling forecasts. Only a few organisations know how to implement these new tools to gain maximum benefit. This workshop shows you how to prepare and use rolling forecasts to support strategy and better manage cash flows and resources. The new process requires a number of key steps that will be covered in the workshop. You will also work through a case study that will reveal the pitfalls of poor implementation and show you how to do it right.