Consider each of these three factors and the important role they play when creating a culture of projections.
Factor 1: Create Effective Budget Systems that Support Program and Project Managers
In continuing to explore creating a culture of projections, you must first remember that the most effective budget systems are designed to support the program and project managers. These critical managers shoulder the heavy burden of managing the largest portion of your organization’s budget. So it makes the most sense that your budget system should be first designed and built to meet your project managers’ needs. These project managers are in constant decision making mode. They need multiple sources of information to validate their decisions are taking them down a path to success and not a path to failure. On the path to success, project managers must consider how to efficiently and strategically use financial resources. Their initial gage is to compare progress to their budget for that project. This benchmark allows them to assess the burn rate of these resources against a goal they had established earlier when they had assembled the budget for the coming year. Having a budget system that supports the project managers will enhance their engagement with financial reports. Three factors to have are manager ownership of the budget, respect for creative input, and access to overall organization financial picture so they can see how the pieces of the puzzle fit together.
Ownership is enhanced at the beginning through engagement in the budget building process. Without knowing it, senior management often takes ownership away from project managers by dominating the assembly process for next year’s budget. Connections here are most important. Allow project managers to assemble the first draft of next year’s budget in as “unfiltered” a manner as possible. To bring the point home, I often refer to the first draft of the budget process as the “Selfish Draft” to emphasize to project managers that this is your budget and your opportunity to design your program, make changes, and vision new outcomes. The tone of ownership is set not only for this budget but for future budgets and the next step of constantly looking forward through rolling projections.
Factor 2: Get Program and Project Managers to Own the Process of Looking Forward
The second key factor to creating a culture of projections is to get program and project managers to own the process of looking forward and not overly rely on year-to-date budget comparisons as their only benchmark for success. Engagement in the process of forward thinking and introducing rational sustainability planning concepts into discussions acclimates project managers into an assessment process that not only considers past performance but also how past performance along with new current information impacts future performance.
To consider only past performance (year-to-date budget comparison results) is short-sighted and incomplete without integrating changing economic conditions, new input from the field or other new information that will have an impact on future results. The perfect example of a flawed year-to-date budget analysis is reporting a savings on expenses for a project that is in a short delay knowing that when activity picks up again, costs will be at least be on budget if not greater as a result of the delay, which often adds to overall project costs.
Factor 3: Interactively Share Forward Planning Information with Other Project Managers and Senior Management
The third and final factor to consider is interactive sharing of forward planning information with other project managers and senior management. Integrating projections into a project manager’s psyche will have a profound impact on how they perceive year-to-date results and plan for completion of their project. However, performance is exponentially enhanced when projections are shared among project managers and senior management. This enables project managers to cover the “I Question” (how I am performing as a manger?) in the interactive context of the “We Question” (how are we performing as an organization?) receiving both feedback and encouragement to manage through an interactive network process that will address both long-term sustainability initiatives while improving results for positive outcomes in the current budget cycle. You can formalize this process by integrating regular projection discussions into monthly manager meetings and encourage informal sharing of projections through cross-department manager planning forums and committee meetings.
Projections are never simple. It is hard to peer into the future and predict with certainty. However, a shared process of looking forward both individually and together is very enlightening. The discussions themselves will have an impact on management decisions and the actual financial projections will be icing on the cake.
Explore Part I here.