You start your new company, full of energy and momentum. Your team is aligned under the banner of simple yet powerful values. You company is agile, takes risks, innovates and solves problems as they arrive. Then you grow the next notch, implement a budget and planning process, and wait, do I hear those entrepreneurial wheels grinding to a halt?
In an earlier blog post “Strategy, Startups and the Elephant” I talked about the challenges of living the “entrepreneurial execution” dream even for entrepreneurs. There is no free lunch. This entrepreneurial magic doesn’t just arrive and embed itself. It takes an awareness of what drives this culture. The values and the supporting processes have to be there to keep it going. Processes that kill it have to be avoided like the plague. There is a reason why many companies don’t succeed in building a high performing execution culture. Companies by habit implement a traditional command and control budgeting and planning process, and by definition these processes drive command and control behaviors. Command and control is not what you want.
Try instead what Jeremy Hope, Director of the Beyond Budgeting Round Table (BBRT), calls “adapt and endure”. Isn’t that what we are doing at the start, anyway, adapting and enduring? If we do it well, we get to the next level in the game. So keep doing it! Don’t get talked into implementing annual budgets, annual resource allocations, fixed targets and the inevitable actual-budget-variance reporting. Jeremy perceptively calls the traditional budgeting and planning process “a highly political management game often unhinged from reality”. Management is continuous, and shouldn’t start and stop based on accounting deadlines.
Jeremy Hope illustrates his point with a business version of The Tortoise and The Hare fable. Hares set wildly aggressive targets and incentives that they “control” through detailed and rigid budget processes. These targets provoke lots of internal negotiations that quickly have less and less to do with external realities. Tortoises “keep their eye on the path ahead and continuously improve performance. Their aim is to adapt to changing conditions, beat their peers.” And we all know the end of this story. The Tortoise wins.
You can build into your company the ability to adapt and endure by avoiding the command and control trap of traditional budgeting. Key to building in entrepreneurial execution is the rolling forecast. As Jeremy said at the recent BBRT conference “Don’t roll it up, leave it where it is!”
Remember the lessons of The Knowing-Doing Gap. Doing something, even just one time, establishes precedent that will too often override thinking. So make sure you choose wisely when growing your company. Don’t mindlessly adopt company practices and processes that distance you from reality. Think through the consequences and choose those processes that fit your goals. Choose to stay entrepreneurial.
