When it comes to the history of budgeting, America’s appetite for hot dogs is as good a place as any to reveal how the notorious business process became so deeply rooted in business enterprises. It seems that the revelry of 1920s triggered an unforeseen uptick in the sale of wieners, and the folks at Armour Meat Packing of Chicago were struggling to keep up with demand. The situation eventually led Armour’s finance committee to turn to James O. McKinsey, an esteemed accounting professor and consultant, whose lectures and writings safely reserved a place for him inside the vanguard of the budgetary control movement.
“Armour became James O. McKinsey & Company’s first client,” wrote the late Marvin Bower, one of McKinsey’s early recruits who later would later lead the esteemed consulting firm for 17 years and became widely recognized as McKinsey & Company’s modern founder.
Bower wrote: “Mac simplified the concept orally in this way: ‘A budget is a statement of policy, expressed in terms of future accounts delegated to units or an organization.’ This concept is the origin of our top-management approach.” And so from McKinsey & Company’s birth to its arrival in adulthood – decades later – budgeting served as McKinsey’s “meat and potatoes” consulting work.
Today, when it comes to introducing new best practices and processes into a mature organization, the resident champions of organizational innovation no longer enjoy McKinsey’s “first mover” advantage, or the prospect of encountering a virgin enterprise with few deeply rooted legacy processes. Instead – more than likely – they will find themselves awash in the lingering procedures and mind-sets of multiple past management regimes.
How, then, do you root out the deeply planted processes of the organizations of yore?
Having recently attended a conference for the Beyond Budgeting Round Table, a network of member organizations with a common interest in improving planning and forecasting and a known distaste for traditional budgeting, I thought I’d share a short video clip from the conference featuring Steve Player, the BBRT’s North American director.
And as for how to remedy McKinsey’s lingering business process, Player’s message could not have been more straightforward: “Grab hold of business process by its roots and pull.” ¤