Why budgeting fails, and what we can do about it.

Our own Tori Gilbert summarizes Harvard Business School’s paper by By Prof. Peter Horvath and Dr. Ralf Sauter.

“Summary:

The traditional budgeting process is counterproductive. It is inefficient, rapidly becomes obsolete, doesn’t motivate the right behaviors and is out of sync with strategy. Traditional budgeting is especially not suited to the realities of dynamic markets, making it difficult to implement budget adjustments called for throughout the year.

To be most useful in a dynamic marketplace, budgeting must integrate with and support strategy. The authors propose six guiding principles for an advanced budgeting system that optimizes the roles of budgeting while supporting strategy execution:

1. Align budgeting to strategy.
2. Link relevant nonfinancial performance measures to budgeting.
3. Reduce detail through the use of aggregated budgets.
4. Use rolling budgets instead of fixed budgets—a continual planning process, frequently updated and adaptable to changing conditions.
5. Use relative targets instead of fixed budgets to reward people–measuring success by comparing performance against relative, self-adjusting performance measures. Relative targets can motivate the right behavior, guiding people to act in an organization’s best interest.
6. Increase the focus on cross-functional core processes instead of departmental and organizational unit performance. This leads managers to be more attentive to organizational strategy and goals, and fosters collective effort and teamwork instead of internal competition for resources.

The Balanced Scorecard (see links below) is described as a helpful alignment mechanism. The Balanced Scorecard can supply the coordinating functions for budgets by communicating strategy to managers and give them direction; it can help managers oversee strategic initiatives and link them to financial activities. The BSC’s clear depiction of strategic priorities helps to set firm guidelines for budget planning. When implementing the BSC, it is crucial to de-emphasize the importance of budget-related objectives to the benefit of BSC-related objectives, while reducing the level of detail in the budget—otherwise you’ll only double the work and increase the frustration level.”

Read the article here.

Read the Wikipedia article on the Balanced Scorecard approach here.

What do Counter Terrorism Measures Mean for NGOs?

INTRAC - the International NGO Training and Research Center based in the UK - has been conducting research into the effects of Counter Terrorism Measures  (CTMs) on the way in which aid agencies work. They have published findings from a series of workshops and a great paper entitled, “Assessing the Implications of CTMs for NGOs“. Having heard so much about CTMs from the US perspective, it was refreshing to read a global perspective on CTMs that includes the current issues in Europe.  The easy-to-read paper talks about some of the challenges NGOs are facing and cites a chilling example a British charity that was designated as a terrorist organisation by the US Government. The Charity Commission found no evidence of any illegal activity. However, the British government has still not interceded with the USG to clear their name.

The NGOs that are most suffering from CTMs are smaller international organizations that cannot afford to put all the checking measures in place, and NGOs in the south who are also unable to comply. The paper also finds that NGOs are averse to speaking out against some of these measures because they are afraid of possible retribution and reduced funding in the future. In the US they have found that retalitory action has been taken against, “government grantees that have engaged in controversial policy discussions or active advocacy that includes points of view different from the administration’s” http://www.intrac.org/pages/CTM_analysis.html. 

This is a chilling paper, but is worth the read to understand some of the far-reaching ramifications of CTMs that we may not as NGOs be considering as we hasten to make sure that we ourselves are in compliance.

Local Government and Conflict

This USAID paper on local government and conflict juxtaposes two concerns that we usually don’t consider together. Generally when we think of local government we think of corruption, lack of capacity, lack of resources, incompetence and apathy. We do not usually think of it as a player in conflict. This paper draws attention to the very real role that local governments play in conflict and how we as development practitioners can support them to mitigate rather than exacerbate violent conflict. It is central to the Do No Harm sort of approach to work with local governments as they work to enhance security, provide better representation, improve service delivery, and cope with decentralization.