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.

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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?



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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