The budget is dead. There is no doubt whatsoever about that. It is as dead as a doornail. This must be distinctly understood, or nothing wonderful can come of industry's 20th-century management model that seemingly grows more dysfunctional with every quarter.
We are of course referring to the corporate budget, not the personal budget or family budget or any other revered variety of that which generally refers to a planned list of revenues and expenses. And while some companies may find this obituary a bit premature, others will likely tell us that it's long overdue and that their budget has been dead these past five years. (One Swedish company claims that theirs died as far back as 1972.) Still, others may claim that we've been duped and have fallen victim to a persuasive activist lobby that stands to gain an inheritance from the budget's demise.
Nonetheless, we say that the budget is dead. At the ripe old age of 87, the budgetary concept took its last useful breath. Of course, there will be some who will argue with sound reason that the budget is much older, and, as you will read, we believe that there is some merit to this. However for the purposes of this article we would prefer to simply report: "Dead at 87" -- a life that may have served all of management better had it been half as long.
In fact, accounting historians will likely someday remember the budget not only for what it brought to business, but also for how tightly it clung to it. This enduring grasp -- a steely fingered clench -- is something that few management concepts have ever achieved with such speed and reach. Thirty years after their inception, the dictums of budgetary control were being disseminated to every part of the world, reshaping organizations and tasking finance executives (or putting a bit in their mouths) for generations to come.
Just how strong budgeting's grasp remains on business might be better revealed by the number of companies that have routinely reported a broad-based system failure in the area of corporate budgeting and control processes, and yet these companies have so far refused to part with their budgets. A recent survey conducted by Business Finance found that two out of three finance executives expect their 2009 budgets to be obsolete within the first 6 months of the year, while 28 percent of finance executives reported that their budgets were obsolete even before 2009 began. This widespread failure of budgetary controls, however, is only a subtext to a much larger management quandary.