Organizational Governance: Set Budget Goals, Priorities & Outcomes

Posted by Matthew Thomas

Getting out of the messes of typical budget procedures and protocols for sound organizational management and governance will take some doing. Organizations are notorious for doing things how they have always been done or have been seen to be done in other organizations, and budgets are often subject to some pretty typical politicking.

Instead of fighting over numbers, budgets can become a helpful tool in leading an organization to meet its desired goals, objectives and outcomes.

If the governance arm of the organization (the board of directors, and in some organizations, the membership) can begin the budget conversation before it sees a budget presentation, it can help shape what an approvable budget is, and reduce the drama significantly. That, coupled with adequate delegation to staff and/or volunteers can dramatically improve organizational performance.

Start with what outcomes your organization wants to produce: what will your community look like? Families? Individuals? The country? The world?

Then, set priorities for how much of your organization’s money is spent on each of the outcomes. Along the way, develop values for how your organization will operate in pursuit of those outcomes. Define the compensation for the senior staff person.

Determine where the no-go territory is: for instance, that expenditures not exceed revenues, or that key programs not be cut without a six-month notice.

Finally, define a list of budget boundaries based on what you have developed so far, in “not” language. Delegate this to staff who will develop the full budget based on the criteria. Commit the governing group to measuring the finished product only by whether the budget reasonably fulfilled the criteria. If the criteria need to be refined, refine them and allow the budget to be re-worked without finding fault.

Doing this will help keep your organization thinking to the future financially and move it out of the usual and customary disengagement mixed with micromanagement.

Design Group International consultant Matthew M. Thomas can assist your organization in setting up healthy budgeting. Click the link below to contact Design Group International and get the conversation started!

Read More ›

Topics: Matthew Thomas, Design Group International, Organizational Leadership, budget, budgets, approval, approvals, finance, finances

Organizational Leadership: Why Approve A Budget At All?

Posted by Matthew Thomas

It may sound like an obvious question with an obvious answer – but in many organizations it is not. Many times, organizational boards or memberships approve budgets because they believe they have to, they always have, and they believe they can’t operate without them. Sometimes budget approvals are written into organizational bylaws.

Nevertheless, the process often becomes an odd combination of disengagement and overzealous micromanagement. What can be done?

A budget is a financial plan. Money flows in, money flows out. Like the personal finance expert Dave Ramsey says, a budget “gives your money a name and tells it where to go.”

Clearly, strong organizations have solid financial plans that account for revenues and expenses over a predefined period of time. Thus, setting a budget is an important tool in managing an organization.

However, approvals of budgets as they are often done fix numbers in place for at least a year, when in many cases reality changes more quickly, thus reducing organizations’ agility.

When governing financial plans, organizations need to pay more attention to their goals, priorities and outcomes and whether their solid financial plans measure up against those goals, priorities and outcomes rather than diving into the depths of the numerical data.

In our next post, we will begin to look at how that may be done.

Design Group International consultant Matthew M. Thomas can assist your organization in setting up healthy budgeting. Click the link below to contact Design Group International and get the conversation started!

Read More ›

Topics: Matthew Thomas, Design Group International, Organizational Leadership, budget, budgets, approval, approvals, finance, finances

Organizational Leadership: A Common Budget Approval Scene

Posted by Matthew Thomas

A lot of us have been there – sitting in a meeting (board or membership meeting) that requires a budget approval, and something happens like this:

“Here is the budget that so-and-so worked on. Any questions?”

[silence, more or less everyone busy buried in the report that they may or may not have read to begin with]

[group member, who finds the silence awkward] “Why is this number $____?”

[A brief answer.]

“Ok.”

Then, a group member who has a pet project or program begins to question the lack of funding for her project. As the minutes often read, “Vigorous discussion ensues.”

Eventually, the budget passes, more or less as presented, in every minor detail.

We who are budget-y types often set ourselves up for this scenario: reams of numbers, comparisons to last year’s budget and actual, projections based on percentages of last year’s growth or loss, and so on.

Even summary budgets (and really, what budget isn’t a summary unless you really inventory every paper clip and every dust-mite’s worth of toner!) can run into these same problems, since they just make the numbers bigger or smaller in chunks:

  • Overall group disengagement
  • Group members wanting to feel engaged and wanting to sound astute so commenting about trivia after wading about in the rows and columns of figures
  • Squeaky wheel / axe grinder politics
  • Micromanagement of actual expenditures (but of course only after the fact when the report is produced in most settings, or the perpetual approval of even the most mundane, usual and customary expenditures in others)

In most cases, dividing your revenues and expenses into small handfuls of categories simplifies explanation (it’s easier to count and track 5 revenue categories than 120 in a group setting), but doesn’t actually get at the real issue of budget approval: what are we approving of, and why?

In our next post, we will begin to address alternatives to this budget scene. No, it doesn’t have to be this way!

Ready to be done with this kind of budget approval process? Design Group International has consultants available to walk you and your organization through a new way of governing your finances. Click the link below to get the conversation started!

Read More ›

Topics: Matthew Thomas, Design Group International, Organizational Leadership, budget, budgets, approval, approvals, finance, finances