Budgeting and Allocation Alignment

The premise here is that as an organization, one has to take an enterprise view of the budgets & allocation of resources to the initiatives and activities, which are closest either to the organization strategy or to the money making machine of the company. Organization strategy has core priorities related to taking the business forward. Money-Making machine (even if it is not part of a core strategic priority) is the ongoing cash-generating activities which have to be maintained and continuously improved (over and above pursuing new initiatives).

Investment Decisioning

Every project with great cost-benefit equation may not be a candidate for investment. Cost-benefit equation is perhaps not the best criteria to rank the projects for investment decision. One has to look at the impact of not doing the project, the closeness of the project to your core priorities and money-making machine. One has to see if the CBA has been proven in the industry and organization's readiness to do justice to the investment.

Keeping the lights-on

Keeping-the-lights-on is related to keeping the basic operational capabilities in place. Within these capabilities, one has to look at the distribution of resources based on the criticality of the processes. Typically, the per-unit cost of keeping the lights on for a given process should either stay flat or should come-down.

Absolute and Relative Budgeting

To ensure that your budgeting and allocation is aligned & focus on the strategic priorities and on your money-making machine, one should adopt a mix of two methods. One is to allocate the money as per the needs of core priorities, and then distribute the rest of the monies to the non-core areas. This is the absolute approach. After you have done this, the next stage is to normalize your budgeting. You can look at the %age distribution of investments across your mission-critical, important and desirable agenda and see if the distribution makes sense. The other aspect of the relative investment is the time-span of the investments. If the investments related to your core priorities are skewed towards the later part of the year, there might be something wrong.