Blog. Lean Budgetting | Performance Improvement

Lean Budgetting

How to shift from Project Planning to Value Investing

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Our world was in standstill during the pandemic in the period January 2020 to May 2022. Companies where possible kept the trains running. That said many companies are shifting from Project Planning to Value Investing. A Flexible Operating Model with lean budgetting. Based on our experience, we share best practices of Lean Budgetting.

Many projects are too complex to predict the budget, deliverable, scope and timeline. Lean Budgetting is a governance approach that funds value streams instead of projects accelerating value delivery and reducing overhead and costs.

Some key basic finance principles are, as follows :

Prioritize and work on high value projects to finish first

Each value stream operates within an approved budget

Shorten the budget planning cycle (from annually to semi annualy) in order to create flexibility

Focus on EBIT contribution instead of budget and drive sustainability.

Expenses are a percentage of sales

Always keep 10% for unknown expenses

Monitor performance and organize short feedback loops

On a continuous basis companies require to reframe their strategic plan and long term vision whilst managing constraints like permits, resources and liquidity. In general, capital contraints are forcing companies to

free up cash. Downsize your expenses and look into items you no longer use. Reselling items has become a huge maket.

focus on key value streams and;

lean out operations. Every other process step or person involved for that matter increases errors. Simplify where possible

but don't forget asset integrity. Many companies are breaking the ground rule investing less than annual depreciation. This actually means you are shrinking the company.

During the pandemic some companies even continued ramping up the backlog of replacement capital expenditure. This will result in safety issues with licence to operate at risk for that matter.

Scaled Agile Framework

In case you are interested in Scaled Agile Framework we refer to Blog. Flexible Operating Model.

…with our head in the sky and feet in the mud