BPM & Budgeting

Brad Power posted a blog on ‘BPM For Real’ called “Stop budgeting, start improving”.

In his blog, he says:  The typical approaches of budget cuts and layoffs usually don’t result in sustained changes to their cost structure — the costs creep back. Instead, companies must make fundamental changes to the way they work — how they market and sell, handle orders, bill for those orders, manufacture and distribute their goods, and serve customers after the sale.

My Thoughts…

It is reasonable to assume that a successful outcome is lower costs.  And, it is reasonable to think that implementing budget cuts and layoffs will create a lower cost structure.  Since the lower cost structure wasn’t sustainable, it is time to look for other options.

Back in my college days, I did a stint in the Navy.  I was in charge of the ship’s checkbook – managing the budget that keeps the ship running.  We had a budget of something like $25,000 per quarter. 

The US Navy point of view

The successful outcome for the Navy was that the ‘entire’ budget for the ship would not increase by more than 5%.  If the ship spent their entire budget, they got a 5% increase for the next year.

My Ship’s point of view

The successful outcome for the ship was that our budget would increase by 5%.  So, at the end of each quarter I was to spend the money left in our account by purchasing parts and tools.  If I spent the entire amount, we would get our budget increased by 5%.  If we didn’t spend the entire amount, our budget would be lowered.  It was easy to see that we were rewarded for spending all of our money.

The Taxpayer’s point of view

Most voters would define a successful outcome for the Federal Government as not spending more than they take in.  If the Government really wanted to NOT spend more than they take in, a good start would be to stop rewarding departments/people for spending their entire budgets. 

Your Thoughts…

Doesn’t that make sense?

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