The budget trap
The increase in the pace of change across most industries, combined with an increasingly harsh and punitive investment community has forced many companies to become focused on short-term results at the expense of long-term value. The drive to focus on short term results causes decision-making based on the quarterly budget, rather than the long-term strategy. And while maintaining a reign on the quarterly budget appears to be in the interest of the organization's health, in fact these short term decisions can and do cut off longer term opportunities. They stifle the potential for growth because they occur in a vacuum independent of what the organization is trying to achieve over time.

This short-sightedness can only be corrected by accurately forecasting quarterly results and ensuring that resources are continuously allocated to the actions that will result in long-term shareholder value.

The traditional fixed budgeting and planning processes that focus on projecting costs and actions for the future year is woefully inadequate for either forward-looking projections or measuring strategic performance. Many companies feel that they have to continue to rely on these processes because they have yet to find a tool and approach to get them out of this trap.

The keys to success
There are five key principles that distinguish successful organizations that are able to forecast results and allocate resources efficiently while achieving their overall long-term strategy. These organizations do the following:

• Align operational planning and budgeting for strategy execution: Bring together the often-disparate processes of operations planning and budgeting to ensure they are consistent, linked together, reflective of each others' priorities
• Increase adaptability to change through continuous planning: Adopt a rolling forecast approach
• Manage strategic initiatives to achieve results: Focus the organization on the key strategic initiatives, while systematically and rigorously jettisoning those initiatives and activities that are not tied to strategic goals
• Motivate people and actions through relative performance targets: Engage everyone in the long term success of the organization by tying individual performance targets to strategic results
• Increase planning efficiency by reducing detail and effort: Home in on the key strategic elements and activities to focus on doing and reporting on only those aspects of the business that drive the strategy, eliminating the effort and time required to track and plan elements of the business that derail this focus

Strategy-focused business planning to achieve results
The adoption and execution of these principles result in Strategy-Focused Business Planning (SFBP). SFBP is a continuous process that leverages best practices in strategic planning, goal setting, tactical planning, forecasting, budgeting, reporting, and initiative management.

SFBP is a powerful framework which allows organizations to drive strategic results through their planning and budgeting process. These organizations can access a range of methodologies and tools to implement SFBP, all of which are well understood and documented, including:

• Balanced Scorecard
• Rolling Forecasts
• Initiative Management

However, organizations must also learn the keys to achieving benefits using these tools to develop SFBP. In our experience, critical success factors include elements such as the appropriate timing, integration, and level of detail for these tools. The effectiveness of this integration can be demonstrated through the successful case studies of organizations that have adopted these principles.

Learn how companies have succeeded in making their budget strategy focused
Attend the Netconference entitled "Make Your Budget Strategy Focused," presented by Antosh G. Nirmul, Manager, Balanced Scorecard Collaborative, and hear case examples of how other organizations have executed these five principles to achieve breakthrough results. Register for free at http://www.bscol.com/archive. 

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