It’s a sign of the time; and also a much deeper problem. For some time now, our website has seen many visitors from searches for budgeting and variance reporting. Rather than just maintenance professionals, they are the searches of different professions in enterprise operations.
It’s a sign of the time that worries me because it will further tarnish the perspective of budgeting and variance reporting. At the same time it has exciting implications because our profession is now positioned to be one that keeps its firms out of the problem these desperate searches reveal.
The ability to plan and guide a business with effective budgeting (article available), and variance reporting (article available) and forecasting is an organizational skill. Furthermore, it is a skill that serves a purpose far beyond merely cost management.
An effective budget is a build-up from nonfinancial details connected to “what is success” with respect to the firm’s business strategies (article available) for the year. The nonfinancial details are transformed to dollars as they rollup along multiple paths through interface measures and the financial statements to returns. In turn, variance reporting gives the firm the skill to know if it is succeeding at its business strategy by measuring against the nonfinancial details and accordingly steer itself to the planned success.
Now I fear that traditional budgeting and variance reporting methods are being used as a tool of the devil. Consequently, I also fear that any current spark of interest to build the organizational skill for effective budgeting and variance reporting will be abandoned when good times return.
Firms that have effective budgeting and variance reporting would have used the skill to make the business better during these tough times. In turn, they would also use the skill to make the business better than it will otherwise be once good times return. If such firms were widespread, we would not see firms desperately searching the web for advice on budgeting and variance reporting.
I have a dream; one that is now at hand. It is that our profession soon becomes recognized in the executive suite as one of the few that have the knowledge base to make effective budgeting and variance reporting an organizational skill.
Reference: See Chapters 3, 6 and 8 of the book Maintenance Reinvented and Business Success.
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December 9, 2009
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Effective budgeting and variance reporting is an absolute requirement of today's maintenance environment. So too is the ability to understand the story that variance reports tell. As you state in your book, today's maintenance decisions are typically based on the health of the assets. They fail to consider the impact that the asset has on business performance. If maintenance is to become a differentiator in business success we need to make balanced decisions. The balance being between the short term needs of the asset and the long term success of the business. The real problem with implementing a business centric maintenance program is that most decisions are made by individuals who have limited insights into all business implications. Using balanced, targeted, and timely reporting of business performance will demonstrate the impact of recent decisions. Understanding what to do with the information requires substantially more insight.
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