Budgets
I have a very important meeting coming up, and very important meetings produce a lot of worry and need a lot of careful preparation. During two days in late September a group of the IBO’s most senior staff (18 of us from around the world) will try to agree on a draft operating budget (totalling about US$ 60 million) for 2006.
We have never done it so openly before and this meeting is the culmination of a year’s business planning which started when every department in the IBO set its objectives in the light of the strategic plan. There is a beautiful logic about it all: the corporate plan leads to departmental plans (which, importantly, feed into staff objectives as part of annual appraisal) and these are translated into next year’s budget requests. Thus, the budget becomes what it should be, not a list of figures, but a financial plan to achieve our strategic goals.
Meanwhile, the Council of Foundation, the IBO’s governing body, has approved a set of parameters for the budget including expected income, salary and fee increases and so on. Following pro-bono advice from Goldman-Sachs we have taken out currency options with our bank for 2006 to protect the organization from the worst effects of the unpredictable US dollar.
So: all is ready, everything is in place. But there is just one small problem to be solved – the requested expenditure will exceed our anticipated income by a very large figure, by several million dollars I am prepared to bet. As I write I have not seen the detailed figures but I make the prediction with complete confidence because every budget I have ever worked on has been the same. Expectation massively exceeds reality: hopes are dashed, ambitions are thwarted and boring old compromise wins the day. Why didn’t we just divide our additional income by 18 in the first place and go home?
We are in for some tough negotiations but I hope it will turn out to be a positive learning experience for everyone. I shall try to remember the advice of Fisher and Ury in their excellent book Getting to Yes: Negotiating Agreement Without Giving In (Penguin 1983):
- Separate the issues from the people and be tough on the issues
- Try to get behind the positions people adopt to understand their interests – why they have adopted that position?
- Involve everyone in generating different options for resolving the problem
- Use objective criteria (‘You say this will lead to an improved service for schools – exactly how?’) to judge different options.
I shall also try to remember that the professional virility of senior staff is often measured by how they perform in the annual budget negotiations. They are inevitably seen as the champions of their departments, but we can reduce the sense of personal exposure by trying to focus on the priorities of the organization as a whole. This, after all, is what the process of strategic planning has been all about.
George Walker
