CEO Mindset Shift: Why January Budget Panic Is Optional

Read time: 2.5 minutes

How Great Leaders View January Budget Variance:

1. A January variance does not indicate bad news... rather, it is an opportunity for the leader to adjust their strategy in advance of any changes in performance due to increased expense.

2. A budget represents broken assumptions, not a failure of the leader/supervisor.

2. Most budgets are unsuccessful because assumptions do not meet reality. A leader must view budget variance as a diagnostic tool and not as an example of a poorly executed budget.

3. A budget should not be viewed as a promise but as a well-educated guess. As soon as new data becomes available, a leader should evaluate the underlying assumptions as if they were being made for the first time rather than defend their current budget.

4. A fast Q1 budget cut often stems from fear or panic. While a leader may appear to respond quickly to budgeting issues, this quick response may actually reduce the long-term options and strategic initiatives.

5. The questions a leader asks about accountability will help determine how the organization responds to a situation. For example, when asking the question, "Who spent more than their budget?", the answer tends to be narrow. However, if the question were, "What caused you to spend over your budget?" the result would lead to a better understanding of where improvement can be made in making future spending decisions.

6. A leader should internally process the variance quickly and independently from an emotional response. How a leader processes variance will have a significant impact on how the organization reacts.

💡Key Takeaway: 

The most important lesson to remember is that variance in January does not represent a crisis... rather, it serves as a briefing to leaders. Those who react with panic tend to attempt to recreate the existing plan, whereas those who adapt will create a more effective plan based upon the data collected during the year.