Brockville EMC members were treated to a new approach to the budgeting & forecasting process this month at an SIG hosted by Hewitt (Brockville) Ltd. and held at St. Lawrence College. Nicole St-Aubin, Aim Consulting, spoke to this Consortium last year re: Performance Management & KPIs. She was asked to return this year to address the topic of Budgeting and Forecasting. Budgeting is one of those processes that stats show takes about 4 months and 20-30% of senior management staff time according to Nicole’s
Nicole's full presentation is available on the Brockville Member webpage.
Nicole walked us through a number of "Budget" establishment theories such as Zero-Based Budgeting, Participatory Budgeting, Program Budgeting and a Traditional Budget process. A Round Table check found that all members in attendance were using one form or other of these processes. Issues that arise from the budget process include:
- Do we get value for time invested?
- How accurate are assumptions?
- New information comes forward after budget is completed
- How to link budget (based on past) with strategy (forward thinking)?
- Ceiling & floor on costs
- Budget games played (not always value-added) see slide 10in presentation
Today in a more Customer focused manufacturing environment there is the beginning of a movement away from "Fixed performance" contracts to relative targets and awards. There are two slides in the presentation that compare a fixed process to a relative process. For this process to work management must support the following:
- Espouse the principles & guidelines (drive it down)
- Create and support a "High Performance" climate (skills, ownership & accountability)
- Staff/employees must have the freedom to make decisions
- Accountable
- Open information systems
- Ethical climate
Performance management in such a system is aimed at the front-line manager which helps an organization to move forward quicker and uses the following support systems - benchmarking, Balanced Score card, Activity-Based accounting, an enterprise IT system with rolling forecasts as well as SVA.
Today many plants are becoming more involved in customer-centred manufacturing but the challenge comes in the fact that traditional budgeting issues negate (fight against) the changes made to promote new customer focused marketing and production. (Slide 25). If your plant is going to move beyond budgeting to a more customer focused system the following conditions must be in place:
- Reason & vision for the change must be communicated
- It must become a company-wide project
- Leadership agreement is key
- Pilot project or entire company
- Design & implementation process
- Training***
- Requires a change in behavior
- Continuous evaluation
EMC does have a "Lean Accounting" course available if you would like to learn more about administrative and accounting systems that match CI/Lean journeys strategies. http://www.emccanada.org/documents/leanmanufa/leaningaccountingandadministrationpdf
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