Steward Leadership: Role differentiation in budget development

Posted by Matthew Thomas

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matthew-thomas-2One of the basic financial planning tools available to steward leaders and their organizations is a budget. Yet, in many cases, this planning tool, in the wrong hands, becomes a tool for power and control.  Part of this is because of the way in which many organizations conduct their budget process. Often, this is a zero-sum game that pits departments and colleagues against one another. This is particularly true in the nonprofit and faith-based sectors, although it can be true in any corporate environment.

Good steward leadership of financial role differentiation can help reclaim the budget as a planning tool for organizational excellence, and can help to provide innovative, creative solutions to fiscal challenges. Over and over again, I have seen decision-makers at the highest organizational levels request for the wrong kinds of budgetary documents to be set before them for the wrong kinds of approval, leading to confusion, frustration, and conflict. Some executives and managers request stacks and stacks of numbers from their subordinates and from the "financial people," with no clear object in mind as to what will be approved and what will not be. Others just want a summary of the same data, but still without the clarity as to what they are really looking for. In some government-funded or subsidized institutions, if a department does not spend its entire allotment in a particular fiscal year, it receives less the next year, automatically. This leads to many leaders cramming purchases and salaries in to the last few months or weeks of the cycle to inflate their numbers so they will have more to work with the next year. This could hardly be considered strategic planning.


Like what you're reading? Subscribe Now! In many enterprises that can be considered institutions, this budget process is so painful for all involved that it leads to a second problem: no one wants to make adjustments to the existing plan until the next pre-ordained cycle. This can create two divergent results: first, there is the rigidity of binding people and projects to a budgetary plan that no longer makes sense, given actual conditions. Some of this may be due to mismanagement of the plan by a subordinate, but in many cases, it is just due to the fact that no plan is perfect, ever, and things change. The second divergent result is that of more or less ignoring the existing budget plan (or parts thereof), and just plowing on ahead, hoping the black ink balances out the red in the end of the cycle. And, depending on available assets, cash flow and dumb luck, sometimes it works out.


Financial role differentiation can help reclaim budgets as a planning tool that helps organizations implement their overall strategy and achieve their goals with excellence. Innovative budgeting presses decision-making as close to the actual work as can be reasonably attained, particularly when broad, proscriptive (as opposed to prescriptive) policies and orders have been created ahead of time. These proscriptive policies begin at the highest levels, and essentially set the process up for approval from the beginning.


While the bookkeepers and accountants will need to tie each budget line item to a specific account number, typically the strategic people will not need to see that. They will, instead, need to see that the trends are working toward the goals and where they need to adjust big-picture items to keep things moving forward. Management leaders will then spend time helping departments and projects keep financial pace. And procedural roles will have clarity where everything goes.

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It helps when the whys and wherefores of the overall strategy penetrate deeply into the organizational structure. This can help people with individual budgetary needs and desires to work inside a bigger picture than their project, department, or group.


Design Group International's Financial Services Roles Tool can help differentiate these procedural, management, and strategic roles as they must interact to produce a financial plan. Once a plan (budget) is in place, they can continue to work together to make adjustments to respond to opportunities and challenges as they develop. The tool is free, and it can help show where different roles fit, and thus what kind of approach to budgets and planning they may need to take.

Financial Roles Get the map!

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Topics: Matthew Thomas, budget, confusing income with the budget, Financial roles

Financial Health: 10 Characteristics of Healthy Budgets

Posted by Matthew Thomas

matthew-thomas-2As the year draws to a close, many enterprises have finalized their budgets for the next calendar year. In our work, we see a lot of different types of budgeting styles and processes. Organizations that are serious about their financial health create sound budgets. We find that sound budgets tend to have the following characteristics:

1. They are based in reasonably-expected revenues generated from the actual revenues of the past 3-5 years;

2. They have reasonable margin of revenue over expenses to handle any variations in either that may come their way;

3. They have reasonable provision for reserves that help them manage long-term goals, maintenance and opportunity; (My colleague David Van Winkle's Ministry Financing Group, a Preferred provider through Design Group International, has a great tool for measuring whether an organization or individual has adequate reserves to meet its goals.)

4. They have a good sense of the overall volatility and seasonality of their revenues and expenses and plan cash flow accordingly

5. They have a basic contingency plan for what will happen if the actual revenues and expenses diverge significantly from the plan, either up or down;

Ten_Characteristics_of_Sound_Budgets6. They account for as much of the part of the enterprise's economy for which the organization is responsible and as much of that economy as can be reasonably measured and acertained; 

7. They priortize financially the enterprise's stated priorities and goals and can present proposed financial activities narratively in light of theose priorities and goals;

8. They are fully articulated from the broadest, simplest versions presented at the highest levels down to the specific accounting line items representing specific transactions - in other words, even though different people or groups see different levels of detail (or even different amounts of the whole picture), everything connects between the most general and the most specific all the way through the system;

9. They lean in to the future rather than merely repeating the past; 

10. They have room for review and adjustment at regular intervals to maintain a reasonable plan period - in other words, if the budget is for a 12-month period, then, for instance, that budget can be revised and adjusted on a quarterly basis so that there is always a plan for 9 - 12 months out ahead. 

These are just 10 of the possible characteristics of healthy budgets. What would you add?



Financial Snapshot

A Financial Snapshot looks at your basic financial statements and gives you a picture of how healthy your organization's finances are at the moment. Get yours today!

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Topics: budget, Margin, Financial Planning, confusing income with the budget, Financial Health

Steward Leadership: Why Clean Financial Reports are Essential

Posted by Matthew Thomas

Let's face it: setting up and maintaining an accounting system, tracking expenditures and revenues, determining value of assets and basis for taxes - these things don't really seem like a whole lot of fun to many leaders. Nevertheless, clean, up-to-date finanical reports are an essential part of good stewardship.

Why is that?

  • Clean finanical reports reduce waste. If you know how much you are spending, you can give some level of control.
  • Clean financial reports reduce the risk of fraud. If you have people taking a careful look at the books on a regular basis, it's less likely that people with access to your finances can do something nefarious.
  • Clean financial reports are the best way to create projections and plans. Without solid, current numbers, enterprises are flying blind when it comes to estimating where financial growth or pinch-points will be.
  • Clean financial reports are a dose of reality. We leaders can often deceive ourselves into thinking that our organization is doing better or worse than it is. These numbers help to bring reality to bear.
  • Clean financial reports spot problems. Clean reports allow leaders to see small problems and address them before they become significant.
  • Clean financial reports keep you legal. Clean reports make sure that tax payments are made in full (and help with on time, too), and make sure that statutory requirements for organizations are met. Moreover, if legal questions arise as to your organization's or business' use of funds, the reports help to provide backing for what you actually did.

How clean are your reports?

If you would like to find out, we can assist you with a Financial Health Assessment. Click the link below to begin yours today!

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Topics: Matthew Thomas, Organizational Leadership, budget, Design Group International, steward leadership

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!

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Topics: Matthew Thomas, Organizational Leadership, budget, Design Group International

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!

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Topics: Matthew Thomas, Organizational Leadership, budget, Design Group International

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.]


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!

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Topics: Matthew Thomas, Organizational Leadership, budget, Design Group International

Financial Management: Longer-Term Budgeting

Posted by Matthew Thomas

If you have created a trend-based budget for a single fiscal year, you might consider projecting out 3 to 5 years out into the future to see where those trends lead.

Of course, projections are subject to all sorts of on-the ground realities as the unexpected happens or the expected doesn’t happen. Nevertheless, most organizations have enough history to be able to project forward with enough certainty to see where the current income and expense structures will land.

Financial Management: Budget NumbersIn many cases, this longer-term approach will show the balance points between short-term and longer-term goals. In a growing organization, these can indicate how far out the possibility of new hiring, facilities, programs/services/product lines are from being fully funded. In a shrinking organization, these balance points can show where cuts really can compromise the organization’s mission and how balancing a budget one year may still leave long-term deficits, depending on how the cuts are handled and the balanced budget is achieved.

Longer-term budgets can give leaders insight into what interventions need to happen, when, and in what order to keep an organization fiscally sound. Leaders need the longer-term budget to maintain a strategic viewpoint in their organization – rather than merely react to annual line-item requests.

Has your organization had a financial health assessment recently? Click here for an overview of the tool.


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Topics: Matthew Thomas, financial management, budget, Design Group International

Organizational Development: Using Trends to Build Budgets

Posted by Matthew Thomas

As I mentioned in a previous article, it is important to build budgets based on trends that last longer than just one fiscal year. As I mentioned there, using 3- to 5-year trends for both income and expenses will help create reasonable estimates for the next fiscal year. Using these trends disciplines an organization not to over- or under-state any new initiatives that may begin in the upcoming fiscal year.

Financial Management: Using Trend DataWhen examining trends, it is important to look at the various sectors (or streams) of income, as well as the sectors of expenses: staff, facilities, programs/product lines, etc. Each of these may be moving in different directions, but this gets muddy when only looking at the macro trends of the bottom line. It is likely that each one of these pieces will have a trend distinct from the others – which, when combined, will provide the information necessary for strong budgeting.

Standard business spreadsheet software (I am most familiar with the Microsoft suite) has the capacity to create statistically-accurate trends from raw numbers. It is then possible to use these trend lines to forecast how those trends play out over the period of time the budget addresses. Organizations are often surprised where a slow, but steady increase or decrease takes them in a relatively short period of time. A trend-based budget is a great starting point for planning: whether winding down old initiatives, services, or products, or starting something entirely new.

Design Group International provides budget creation support as one of the financial roles we have mapped out for organizations of various sizes. Have you gotten your financial role map yet?

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Topics: nonprofit leadership, organizational development consulting, Matthew Thomas, budget, stewardism, Design Group International