As Financial professionals we tend to think in mathematical terms, and we assume others do to. So when we think about presenting something that is “user friendly” for budgeting, we set up mathematical equations for Budget Holders, and ask them to input their assumptions for missing variables. That’s how we wind up with # of items to produce, # of products/services we’ll sell, # of hours/days of work on something that has to be done.
Seems logical and orderly. But it’s not how managers think, not necessarily anyway.
I was very lucky to have worked closely with some off the charts brilliant marketing and sales people at Pepsi Cola International. And try as we might, we in Finance could never reduce what they did or how they thought into mathematical algorithms.
So how DID they think about the business? They thought in terms of marketing campaigns, consumer and trade events, special incentives, sales meetings, etc. We tried to reduce that to “Okay, if you do X number of consumer events, each one will cost $Y dollars and produce $Z in income…” We even produced budget input templates that reflected those models, you know, “so they could just focus on their drivers.”
But reality was far more complex, and required holistic thinking about how various efforts would work together. I hate the term, but it was about the synergy more than it was about any driver.
Simply put, what we needed couldn’t be found in a driver. It could only be found in the mind and the judgment of our managers. Tapping into that, and getting that thinking reflected in your budget, turned out to be a powerful thing for us.
And how did it work out? Pretty good. Pepsi increased shareholder value by over $32 Billion over the past ten years. And by the way, that’s real money, not a projection found in a model (smile).