People (30% of difference at Best-in-class companies)
I worked half of my career at headquarters and a half running local finance organizations. These quotes resonate with me:
"Conventional budgeting is an exercise in corporate gaming “because everyone is negotiating for the lowest [target]”, while pressure to “hit the budget numbers” means that no trick is off limits.
Jack Welch, Former GE chief executive, Financial Times
“People with targets and jobs dependent upon meeting them will probably meet the targets — even if they have to destroy the enterprise to do it"
W. Edwards Deming, Quality Guru, Financial Times
On People and accuracy
Some companies have physical Budget meetings and then go out for dinner.
Many years ago, after a friendly discussion and some wine, we started a bet. The rule was that each Senior Manager will forecast the sales growth and bet $1 on it. The number provided would not be used the following morning to challenge the Budget discussion (we honored that principle).
Those bets consistently proved to be the best forecast of sales growth. As Global Controller or CFO, there is tremendous value on accurate information.
We have debated for years why was it that those bets were more accurate.