The Scary Word For Delivery Teams – Budget

Let’s get into a topic that might be holding your team back more than you realize—traditional budgeting. While it's been the go-to financial strategy for ages, it might not be doing your teams any favours. In today's business world, sticking to rigid budgets can feel like fitting a square peg into a round hole. So, let's see why traditional budgeting might be cramping your team's style and what you can do about it. What: Traditional budgeting involves setting fixed financial targets for the year, often based on last year's data and a lot of guesswork (Hope & Fraser, 2003). This means your team has to stick to these numbers, no matter what surprises the year throws. It's like trying to plan a road trip with a map from the '80s—things have changed, and so should your approach. Why: Here's the kicker: traditional budgeting can dampen innovation. When teams focus on hitting those predetermined targets, there's little room for creativity or taking risks. It's all about playing it safe, which can lead to a culture of "let's not rock the boat" (Bogsnes, 2009). Plus, flexibility goes out the window when you're locked into a budget. Your team might spot a golden opportunity or need to pivot due to unexpected changes, but they're stuck without the wiggle room in the budget. How: Let's look at some real-world examples. Years ago, I worked with teams with a mandate and a list of features needed to improve customer satisfaction because it took a nasty hit from previous years within two years. Everything was in place, with the elephant in the room being the budget. The team needed to work through a two-year budget and burned through it faster than planned because of issues requiring additional employees to work on the list. The two-year budget was done in a year, and half the teams got through ¾ of the list. The last quarter went into the “we might do this later” abyss, and the team was dissolved. The executives were more concerned about the money spent than the clients' needs (Hope & Fraser, 2003). Frustration sets in, and morale takes a hit. There was also the stress that comes from meeting arbitrary financial targets. All of this can, and did, lead to unhealthy competition rather than collaboration, and that's not what an agile ecosystem is about. Traditional budgeting often doesn't mesh well with the dynamic nature of modern business. Markets change, customer needs evolve, and your team needs to be agile enough to respond. But you're always a step behind when the budget is set in stone (Bogsnes, 2009). "If we command our wealth, we shall be rich and free. If our wealth commands us, we are poor indeed." - Edmund Burke. So, what can you do? Recognizing the limitations of traditional budgeting is the first step toward empowering your teams. It's time to rethink those old financial strategies and consider more flexible approaches that align with the principles of agility and innovation. Stay tuned for Part 2, where we'll dive into Beyond Budgeting techniques. References: Hope, J., & Fraser, R. (2003). Beyond Budgeting: How Managers Can Break Free from the Annual Performance Trap. Harvard Business Review Press. Bogsnes, B. (2009). Implementing Beyond Budgeting: Unlocking the Performance Potential. Wiley.