Budgets And Budgeting

Shrink the budget cycle.
The traditional budgeting process is tightly connected to the practice of publicly 
traded companies, so an annual budget is practiced in many companies. That 
works well in a relatively stable world, but makes it hard to keep up with 
disruptive changes in prices, foreign exchange rates, new regulations, new 
technological breakthroughs, and more. So, shorter sprints between plan 
adjustments are needed.
This was exactly our experience when working with a large multinational mining 
company during the 2015 commodity price slump. With prices falling more than 
50% on a number of metals, its annual budgets became obsolete in a matter of 
days — but the traditional budget adjustment process was complex, slow, and 
limited in nuance. The company knew that if it stuck to the approved budgetary 
plan, it would destroy itself, but did not know the scope of the damage and the 
specific areas (across many business units and regions) where the pain was the 
greatest.
Moving to a shorter cycle (quarterly, rather than annual) and developing a rolling 
18-month forecast became the solution. Now the fluctuating data is fed into the 
budget more frequently, keeping the budget more current. These “just-in-time 
budgeting” solutions got popular during the 2008–2011 economic crisis but for 

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many were perceived as a temporary fix. Today, high volatility a permanent 
feature, it’s time to accept that they’re here to stay.
• • •
Whether you take on one of these three hacks or decide to develop your own, one 
thing is clear. The challenge we face isn’t about trying to survive until things 
stabilize, but rather about learning to thrive in constant chaos. For that, we have 
to reinvent the the way we run organizations — as the rules of thriving in a stable 
world are completely different from rules of succeeding in a volatile one. Creating 
turbulence-ready targeting and budgeting is a great place to start.