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Our Budget Process Sucks Less Than Your Budget Process – Part 2

September 29, 2011

As I mentioned last post, shared pain and suffering (here to for referred to as “FUN”) are signs of a great budget process.
Our eight week budget cycle consists of four parallel methods that must end up aligning.  I refer to them as Top-Down, Bottoms-Up, Mathematical, and Economic.

You can think of the Top-Down as me in a room with a bunch of spreadsheets open and reports piled on my desk.  It’s my take on where I think next year can end up knowing the big picture parameters we’re operating under and any strategic initiatives we’re advancing (note that the strategy discussions are happening in parallel as well).  The Top-Down model gives me something to react to as the other 3 methods come together.

The Bottom’s-Up is the detailed approach from both a cost perspective (by department and account level) and revenue perspective (by team and individual).  This is the “FUN” world that our managers and budget owners live in.

The Mathematical model is an input driven perspective and model… That is, what are we expecting in project work from our various industry sectors and governmental relationships and how will this drive workloads. 

The Economic approach is happening throughout the cycle and throughout the year for that matter.  It is the “FUN” of trying to interpret how different industries are being impacted by the economy.  As EWI participates in projects in so many different industries and throughout the manufacturing life cycles from concept, prototyping, testing, inspection (NDE and otherwise), as well as repair and maintenance… Knowing exactly how the economic cycles will impact our customers and in turn EWI is a difficult and imprecise science.  But efforting to understand how allows for some actionable conversations and shared understanding about the kind of year our customer’s may be enjoying or enduring.  I have been following (and subscribing to) the Beaulieu brothers at ITR for a number of years as they do a lot of the demystifying for me.

As with all budget processes, the final few weeks is where the “FUN” kicks up a few notches and when I find a few more door dings each night on my 9 year old SUV.  Alignment of the four methods is the only way to declare success so its a small price to pay and I consider it my budget battle scar.

In conclusion, the process only works because our Associates understand our business, our member’s businesses and they genuinely care about EWI’s direction and success.  Honestly, its one of the benefits of being a 501c3… It truly reinforces the “we” factor and this is consistently evident in our annual budgeting efforts.