Budget Blues

“I woke up this morning and I had them budget blues.  I woke up this morning and I had them budget blues.  Don’t know where I’m goin’, don’t care where I’ve been.   Lord knows, I got those budget blues again.”

Time & Season                                                                                

Yes, it’s that time of the year again. Another budget season is or soon will be upon us.  This often means long hours for we the carpenters who build these financial monuments.  Just about every organization known to man has some sort of budget.  What self-respecting organization would be caught dead without one?

With continued economic uncertainty, the task itself and associated processes have become less predictable.  From cub scouts and churches to state governments and major corporations, the scale may differ but everybody got ‘dem budget blues.  Our main point here today is that “tone at the top” matters more now than ever. If it’s so important, then what is it?

By “tone at the top”, we refer to how the typical executive duo of CEO and CFO views a budget, and what they directly or indirectly communicate to their organizations.  The titles may differ, but the song remains the same.  Words and deeds, presence and absence thereof, all become equally important in setting the stage.

Of Sandbaggers & Wishing Wells

Will this year’s budget process resemble a day at the beach?  Ever since the first abacus appeared, budget owners have been “sandbagging”. Perhaps the most classic and perennially visible manifestation of this innate drive is seen with the sales budget. The attempt to set relatively easy targets is largely indicative of human nature. This is the bum for day, hero for a year approach.

Or will it be that this year’s budget process takes on the hue of rose-colored glasses and visions of genies granting wishes?  Some budget owners close their eyes, make a wish, and budget accordingly. Showing improvement is expected in today’s competitive markets, so hockey stick sales curves always remain in season.  Setting unrealistic goals is another time-honored budget trap. This is the hero for day, bum for a year approach.

Tone at the Top

Sales budgets are a keynote for “tone at the top” because they represent a signature opportunity for the CEO and CFO to collaboratively engage – setting and communicating reasonable goals throughout the organization.  Failure to do so, positively reinforcing beach culture or its fairy tale cousin, sends the wrong message.  Success in accomplishing this highly visible first step sets the right example early.

“Tone at the top” impacts the quality and timeliness of the information received from budget owners.  Nothing is worse than receiving bad budget input late. Poor input typically reflects a budget owner’s low priority assignment to the task and usually signals tacit approval of its acceptance by the next higher organizational level.  Otherwise, it would not happen.

The Right Answer Game

“Tone at the top” also takes a hit when key executives play the “right answer game”.  That’s where the top-down requirements approach meets bottoms-up budgeting but gets there too late.  This unnecessarily spins wheels and zaps energy.  “Why did you ask me for my input if you weren’t going to use it?”, becomes the symptomatic question. Unfortunately this question never seems to go to a good place for the person asking it.

Proper “tone at the top” clearly sets forth expectations and empowers those in the middle to safely address budgetary ambiguity.  It’s truly the make it or break it element in any budget process.

A version of this post appeared as an article in the Association of Financial Professionals September FP&A Newsletter.

School Daze

Recess & Other Classes

Another school year begins, and with it comes a new window to the world.  “Have fun at recess” were words of wisdom overheard being passed from father to son as the school bus slowed to make its first stop of the new school year.  Certainly no one begrudges this particular youngster his proper entitlement of fun at recess. At the same time, we remain hopeful that our young student is at other times getting a slightly broader view of his educational opportunities.

We are now in a time period when many observers hold an increasingly prevalent view that the US is falling behind the rest of the world in the so-called “brain race”.  They cite numbers regarding a reported dearth of US students earning technical degrees.  Some also note this as irony against the backdrop of today’s highly connected digital youth.  It is almost fashionable to speak of all this, but does anyone have a solution?

Of particular concern within this context are typically the math, science, and other technical disciplines in which students from other countries are increasingly earning degrees at our universities. Thus, it is reasoned by many that other countries will soon be eating even more of our lunches and that the US will ultimately and unfortunately reap what it has sown.  Somebody needs to do something, but what?

Big Man on Campus

However, not all of the world’s farmers are standing still in fallow fields.  According to a recent Wall Street Journal article, approximately 750,000 new foreign college students matriculated in the US for the 2010-2011 school year, up 32% vs. the rates of the prior decade.  Perhaps the most surprising stat here is that Saudi Arabia’s students were the fastest-growing source of foreign students in the US, posting significantly higher growth rates than the likes of even China and India.

To say that the head Saudi, King Abdullah, sees the benefit of a college education is probably a significant understatement.  Since his reign began in 2005, the Saudi government has reportedly spent over $5 billion on its scholarship programs.  This year alone, some 130,000 Saudi students are reportedly attending colleges around the world.  Scientific education is a top priority in the King’s program as he attempts to modernize his country as a means of compensating for the effects of alleged oil reserve depletion.  In other words, his interest extends beyond the charms of dorm life and football Saturdays.

Globalizing & Virtualizing

To be sure, foreign students are becoming a more common sight on US college campuses.  At least part of the reason can be attributed to increased receptivity on the part of the schools. Drilling down on this path leads us to college strategists seeking to restock the stream as enrollment figures become less stable. Increasingly Americans are openly questioning the value of a college degree.  Cost-benefit equations are beginning to trump the traditional ivy-on-the-walls ideals of a college education.  Indeed, the entire notion of an American Dream is understandably fogged over.  In response, it has become clear that our colleges are increasingly marketing to foreign students to fill their enrollment pipelines.

In a related window to the world development, a mother explained that she recently sent her freshman daughter off to college.  The daughter is attending a US university’s Madrid campus.  So far so good, wonderful experience, international exposure, cultural enrichment, etc….. All true, but here comes the twist.  Mom said that it will actually end up being a little less expensive than if her daughter attended the same college’s US campus location. (Pictured above is a different school – the author’s beloved alma mater University of Delaware)

Can you imagine what’s going to happen when the King finds out that he may be able to save a lot of money by enrolling students at campuses closer to home or signing them up for the free online courses being offered by some of the most respected US educational institutions?  As they globalize and virtualize, US Universities are providing more options for the King and others like him who still see value in a college education.

These are becoming strange school daze, indeed.

School bus photo credit – Bernd Moehle

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