The budget for the future remains stable throughout good times and bad.
In most enterprises—and again not just in business—there is only one budget, and it is adjusted to the business cycle. In good times expenditures are increased across the board. In bad times expenditures are cut across the board. This, however, practically guarantees missing out on the future. The change leader’s first budget is an operating budget that shows operating and capital outlays to maintain the present business. That budget should always be approached with the question: “What is the minimum we need to spend to keep operations going?” And in poor times it should, indeed, be adjusted downward.
And then the change leader has a second, separate budget for the future. The future budget should be approached with the question: “What is the maximum funding these new activities require to produce optimal results?” That amount should be maintained in good times or bad—unless times are so catastrophic that maintaining expenditures threatens the survival of the enterprise.
ACTION POINT: Prepare a “development budget” that contains funds to exploit opportunities. Make sure the budget provides stability of funding in good times and bad.
Management Challenges for the 21st Century
* Source: The Daily Drucker by Peter F. Drucker