Making a budget can be difficult for any industry, any department. But however difficult, it’s a necessity to running a good business. Some would argue it’s a necessity to run a good household as well. For Human Resources, there are additional struggles in budgeting. HR is a department without direct income potential. That often makes budgeting a challenging endeavor.
The CHRO role, in collaboration with other organizational leaders, plays a pivotal role in corporate planning. Here are some pointers on how to avoid common pitfalls and set yourself up for success.
1. The Status Quo
Otherwise known as, “that’s the way we’ve always done it.” Clearly, it’s an easy trap to fall into; after all, it worked before, right? You just take last year’s data, maybe you google something like, “how much will the cost of healthcare increase this year?” and then you pick a percentage to increase by. So, last year’s numbers, plus 7%, equal this year’s numbers and then you move on.
It’s time to break that habit. This is your opportunity to improve the issues you’ve come across throughout the year. Think of what you’ve wanted to change; what you wish could be different. Gather up the numbers of what it might take to initiate that change. Write out why you think it’s worth it and how it will benefit the company.
2. The Vacuum
You have great ideas for next year’s budget. You can see where more staff is needed and where you are overstaffed. You’ve got opinions on the right program or software that’s needed next. You’ve got this all figured out. So, you do it. You come in early, stay late, and do all the workforce planning and number crunching and come up with your perfect budget. But you never consulted anyone else. I’m not referring to HR consulting, but to your colleagues.
In your enthusiasm over your great ideas, you forgot that other people have great ideas too. Coworkers can also contribute to a well-rounded budget plan. They may offer a perspective that you weren’t aware of. Poll your employee network to crowdsource some suggestions. If they don’t, tell them yours. It’s always good to gain support for your ideas, or get constructive feedback. Break out of the vacuum and remember you are part of a team.
3. The ROI
Once you have a good sense of what should be in the budget for next year, you need to consider the financial implications of each line item. Will it end up costing more than it makes or saves? Where is the money for this new idea going to come from and why is it worth the cost? You should always do the research and have the “why” of budgeting costs. Will it help the company grow, work more efficiently, or cut costs? Will it provide a better service to customers?
Just because something is a good idea, doesn’t mean it’s the right idea or event the right time. Everything that’s in a budget should add value to the department and/or company. You need to be willing to put in the work to prove your ROI before the company will be willing to approve your budget.
Aspirant's Organizational Effectiveness experts can help your HR leaders develop and socialize a cohesive plan that keeps your company rowing in the same direction. Use the form below to request a casual discussion about how we can help your team overcome its unique challenges.
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Judy partners with executives and leadership teams to engage and inspire employees in a way that delivers sustainable strategic results. She brings deep expertise and creative ideas to solve organizational effectiveness issues and closely collaborates in a way that builds internal capabilities. Judy has spent over 25 years consulting in a variety of industries, bringing her expertise in behavior to a wide range of organizational issues including organizational behavior change, leadership, change management, culture and engagement.