Strategic Planning

10 ways to ‘budget’ for agility in 2017

In this age of widespread disruption, your organization needs to meet two key goals: One, you need to constantly scan the horizon for disruptive forces. Two, you need to budget for agility, because it’s key to managing disruption — and it doesn’t come freely.

Last month,in my blog post Fend off disruptive outside factors with business agility, I mentioned that The VUCA Report* can help you and your team remain aware of four disruptive forces that are active in the world today: Volatility, Uncertainty, Complexity, Ambiguity. As an ongoing study of disruptive trends and agile solutions, The VUCA Report tracks 35 disruptive trends — and counting. It also identifies 15 agile capacities required to survive and thrive, and curates best practices in agility. For a summary of the latest version of The VUCA Report, check out this Slideshare from my colleague, Dr. Ben Baran.

Based on this and other studies, here are 10 ways to budget for agility and prepare for disruption in 2017.

1. Prepare for new economic scenarios. In this post-election world, we need to plan and prepare for different economic scenarios, commodities prices, exchange rates, interests rates, tax rates and more. Keep in mind that some economists are forecasting a mild recession in 2019. It’s important to be recession-ready at all times, as opposed to waiting until the recession is here to react.

2. Identify disruptive trends. There are several disruptive forces that might begin posing a potential threat to your business or industry in 2017. Don’t assume that disruption won’t impact your business in a major way. You could be in for a very nasty surprise! It’s always best to assume disruptions will happen bigger, faster and sooner than others predict. These resources can help you learn about these trends and prepare for them:

3. Anticipate shifts in workforce dynamics. How much time do you typically spend forecasting shifts in workforce dynamics? Probably not much. Yet, five of the top 10 disruptive trends identified in The VUCA Report fall in the category of workforce dynamics. This year, spend more time with your HR team, executives and managers to understand your workforce. Work together to budget and plan for talent acquisition, development, leadership, engagement and retention, and team building.

4. Focus on effective communication and productive meetings. As described in this blog post, good communication and agile meetings are at the heart of enterprise agility. To achieve both of those goals, you need to budget for them — in terms of time, travel, technology and training.

5. Build your team for agility. Invest in training and development, talent acquisition and retention, employee engagement and real-time feedback. This is especially important in light of the shifting workforce dynamics mentioned above. If you don’t invest in your people, you will incur significant costs associated with workforce challenges. Read more here.

6. Develop agile behaviors and culture. Make sure your company’s core values and culture support agile. Avoid making excuses when it comes to developing the behaviors and culture of agility.

7. Use platforms and tools to support agile decision-making. When I assess organizations for their agile capabilities, I find that most companies score lowest on decision-making. Why? Because that’s implicitly what a business is — a transaction or flow of decisions. Invest in technology that supports collaborative decision-making, helps establish an architecture for decision-making across the enterprise and trains people in agile decision-making. Read more here. 

8. Be aware of tech threats. A top trend identified in The VUCA Report is cyber security. Make sure you budget for this and other technology threats. As the saying goes, “pay me now or pay me later!”

9. Budget for innovation. An implicit challenge for all companies, whether they sell products or services, is innovating on their business model (e.g., version 1.0/2.0/3.0). Most businesses under-budget for innovation and associated R&D. I often point out that service businesses typically don’t have an R&D line in their P&L. These companies need to budget for it just as a product companies do.

10. Consider ROI. What prevents companies from following the investment guidelines outlined above? If they don’t simultaneously budget for the ROI that flows from these investments. These ROI benefits can take a number of different forms, including revenue growth, gross-profit improvements, overhead utilization, productivity improvements, reduced waste and more agile decision-making. When you invest the agile way, you’ll generate an ROI that self-funds the investment.

Planning ahead

The other day, while I was speaking to a Vistage CEO group in Ohio, many CEOs were lamenting the painful process of annual budgeting. “It’s that time of year,” many said. I let them know that, later in the session, I would be shattering that paradigm!

Don’t get stuck in the cycle of fiscal-year thinking. A fiscal year has to do with taxes — nothing more. It’s just a construct created by the government that we follow. It doesn’t need to be used as a cadence for everything, such as FY strategic planning, FY budgeting, FY tracking and reporting, FY goal setting, FY performance appraisals and FY salary adjustments. Instead, focus on agile budgeting and you’ll get more cash at the end of the fiscal year to pay taxes!

Bottom line, don’t let the chaos of VUCA define your organization. Choose your future. Get organized to manage disruption and maximize opportunities in spite of it.

Related reading: 5 strategies for winning in 2017

*Participate in The VUCA Report and you will immediately receive the full version of the current report and all future reports. Note: if you use a consistent GROUP CODE (for your Vistage/TEC Group for instance) and/or ORGANIZATION NAME (for your management team/all-employees to participate for instance) and let us know when you are done, we will send you segmented report comparing you with the average.

Category : Strategic Planning

Topics :  ,

About the Author: Mike Richardson

Mike Richardson is an agility pioneer, dedicated to cracking the code of organizational agility for ordinary people to achieve extraordinary things, making possible tomorrow what seems impossible today with Learn More

Leave a Reply

Your email address will not be published. Required fields are marked *