Richard Cornelisse

Pitfalls of actual to budget exercises

In Indirect Tax Strategic Plan on 08/12/2014 at 7:23 pm

Is it wise to have Stevie Wonder in the drivers seat?

“A Ferrari is a beautiful, very fast and a state of the art car, but we should not put Stevie Wonder in the driver seat. He is an excellent song writer and performer but he never ever will be the next Michael Schumacher. It will be risky business if he controls the throttle” Richard Cornelisse

Although the above example might be considered somewhat ridiculous, strangely enough, the scenario occurs often in our daily practice. The current downturn might even make this situation worse.

Why?

The reason is budget-based incentive targets. Everybody today feels the pressure, and the focus is on making a personal budget first. We might know the best driver and understand that he is the best option, but that does not mean that we would actually want Michael in the driver’s seat.

It does not matter that Michael works for the same company or that his driving would be in the best interest of the client. Stevie wants to make his own comfort zone first; it is in his personal interest.

A potential reason for this conflict could be that personal performance—meeting budget-based incentive targets—is considered to be a higher priority than the company’s own business objectives. If this is something structural, it becomes the company’s “informal” culture and will result in:

  • power struggle over clients (protectionism, claiming clients and winnings)
  • individual’s own “people first” attitude (without a team approach)
  • service offerings being proposed that are actually outside their own area of expertise (no standard quality, increased liability, pricing variation, etc.)
  • lack of a willingness to share relevant client-related information (protectionism)

via Pitfalls of actual to budget exercises especially in the downturn.

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