Planning vs. Budgeting

Before I took my current job, I used to get annoyed when people used the term performance management to describe budgeting.  Budgeting doesn’t manage performance, I used to argue.  It manages financial numbers.  And I didn’t stop there either.  Budgeting isn’t the same thing as planning, I claimed.  Budgeting is how you’re going to allocate resources to reach some objectives.  The plan should describe the objectives – what you want to accomplish, not how.

 

Interestingly, this seemingly semantic debate isn’t really settled yet.  Many people talk about sales planning vs. headcount planning vs. trade promotion planning vs. financial planning. The latter is the only one they really refer to as budgeting however.  And many people now distinguish between financial performance management, workforce performance management and other operational performance management.

 

While I suppose I might feel a little vindicated, I am in fact actually worried.  I don’t think we really want these sub-disciplines. We want integrated planning that includes sales, headcount, trade promotion, and lots of other operational issues.  And we want (adjective-deleted) performance management that considers finance, customers, operations, and employees.

 

We want what we do to be the same as what we say we want to do.  Unfortunately, it rarely is.  Therefore, as Scott Adams might say, that causes us to resort to Leadership by Words:

 

One Response to Planning vs. Budgeting

  1. […] article also reinforces my supposition that budgeting is not the same thing as planning. In Ventana’s words: Recognize that planning […]

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