OP-ED: Business climate necessitates budgeting flexibility

It's time for the annual winner-take-all event where the best players battle for supremacy. In the sports world, most think I refer to the World Series. But in the corporate world, it's not about on-field happenings. It's about budgets.

It's time for the annual winner-take-all event where the best players battle for supremacy. In the sports world, most think I refer to the World Series. But in the corporate world, it's not about on-field happenings. It's about budgets.

Ask PR and communications managers and they'll probably agree that annual budgeting is the bane of their existence. It is hard enough to forecast what's going to happen next week, let alone next year. Yet, they are asked to develop a budget that will move the company forward through economic swings, competitive slugfests, and technological change-ups - all without blowing the profit margin. It's virtually impossible. No one would suggest neglecting next year's budget, but there is no reason (other than inertia) that the budget cycle must be an annual one. Continuous budgeting can be much more efficient. As Yogi Berra might say, take it one inning at a time.
  • A Relic of the Past. In today's fast-paced business world, annual budgeting absorbs too many resources in the third and fourth quarters. Managers spend weeks poking, prodding, planning (and protecting) their budgets. It encourages budget inflation, as some managers make determinations based not on what they need, but on what they can get. And it provokes internal politicking and turf protection in a zero-sum, you-win-I-lose game. Perhaps most significantly, budgeting once per year hampers marketers' ability to think on their feet and shift on the fly in response to changing news and market conditions.
  • A Need for Speed. One of the largest profit centers in most PR budgets is media relations. As an essential element of any campaign, it is not surprising that the level of activity changes frequently. Unfortunately, the budget rarely increases or decreases with the activity. In theory, fees are budgeted to cover the entire year. In practice, however, the news media is fickle. It is as volatile as the stock market. News changes constantly in response to economic, environmental, social, and cultural issues and trends. Successful media strategies follow the media's undulating agenda, which does not fit into an annual budget. The same is true of expenses. One of the largest cost centers for most PR campaigns is clipping services and media monitoring. This is a commodity. Prices change depending on the level of media activity and/or placements, not when annual budget cycles come around. Since two of the largest line items in a PR budget continually change, why would a company want to lock itself into a fixed annual budget when so much of what it funds is variable?
  • A Different Approach. Continuous budgeting, by contrast, allows companies to be fleet and nimble. A quarterly budgeting process might take two days every 12 weeks, rather than three weeks every 12 months. That's a net savings of seven working days. By keeping the time horizon as short as possible, a more realistic budget can be developed and its creators held more accountable. It allows strategies and tactics to drive the budget, rather than having the budget drive the strategies. It's a lot easier to raise a budget based on opportunities than to miss opportunities due to lack of funds. There's no way to escape the fuzzy nature of trying to see into the future, nor the turf-protection pressure that comes with budgeting. But continuous budgeting can keep marketers more attuned and responsive to the market and focused on growing their turf rather than protecting it. Errors can be adjusted to more quickly and PR opportunities seized more readily. Maybe budgeting really is like baseball. In late September, only a handful of teams were still in a position to get to the World Series. Three months earlier, the playoff picture was less clear. But a year ago, nobody would have thought the Florida Marlins would still be playing at the end of October. The fact that the Marlins actually beat the Yankees to win their second championship proves that in baseball, as in budgeting, it's impossible to know what's going to happen a year from now.
  • Chris Moore is an account supervisor for McKee Wallwork Henderson, a New Mexico-based advertising agency.

    Have you registered with us yet?

    Register now to enjoy more articles and free email bulletins

    Register
    Already registered?
    Sign in

    Would you like to post a comment?

    Please Sign in or register.