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How to Hold Departments Accountable to Their Budgets

Getting department heads to come up with projections frustrates CFOs.

It’s one thing to set goals, create a budget, and get everyone to agree to the details. But moving from concept to reality is quite another feat. After all the budget negotiations are done between CFOs and their peers in other departments and business units, how can they hold everyone accountable for the agreed-upon financial plans?

Ideally, they gave the departments enough of a say throughout the process that the promises baked into the final budget are realistic. “Our department heads must prepare their own budgets in order to create ownership,” says Elizabeth Duffrin, CFO of electronics contract manufacturer EE Technologies.  “There is often a negotiation to arrive at the final number when the department heads request a number larger than is available, but in the end, they must agree and buy in to their department’s budget.”

Another tactic that works for Duffrin are quarterly projections, which keep the department managers more engaged in the budgeting process. They no longer have to live with outdated assumptions when sudden shifts in their business occur. And they have access to regular reports to compare the budget to actual results as the year progresses. “Our quarterly projections are much more accurate than our annual budgets have been historically,” Duffrin says.

While getting department heads to even come up with projections is high on the list of CFOs’ frustrations, the work doesn’t end when you finally get an overall budget – incorporating everyone’s input and estimates – in hand. Here are ways, after the budgeting process ends, that CFOs can hold department heads accountable and motivated to do what they said they would do or keep you in the loop if targets will be missed.

Set expectations. As the finance chief, you set the stage for keeping the rest of the company on track with their milestones. “The success of any organization comes down to one thing – how well it organizes its members to focus on and work toward the same purpose,” says Al Holland, CFO of MedSys Group, a healthcare IT services firm. “Your DHs need to know what is expected of them before you can hold them accountable for anything. You can’t assume they know what is supposed to be done, when, and to what quality level. The more clearly you set expectations and define processes and goals up front, the less time you will waste later clarifying – or worse, arguing about – what was really expected.”

Get buy-in. “We can’t make people accountable,” says Halley Bock, CEO and president of Fierce Inc., a leadership development and training company. “Accountability is something we try to legislate, but it is not a process or a tool. It is a choice that each individual needs to make to be responsible for his or her results.”

To inspire the feeling of personal responsibility, ask for employees’ feedback and input – and actually listen to what they have to say. Engagement skyrockets when people realize their opinions and thoughts have a direct impact on the organization, says Bock. And they need to see a link between the budget and plans to the business’s overall strategy and mission, according to Jeffrey Rosengard, principal and global finance advisory practice leader with advisory firm The Hackett Group.

Indeed, department heads are more likely to agree with the processes and commit to achieving goals when they understand two things – how the goals will benefit them personally and how the goals will help move the organization forward, explains Holland. “Once this connection is made, they are more likely to buy in to the goals, and actually welcome you holding them accountable for results as part of the team responsibility, where everyone has to do their part.”

Be clear about consequences. As the CFO, you are a leader talking to other leaders. You may be frustrated with what feels like “needing to babysit,” but you may be the cause if you’re not up-front with the rest of the company. “Bring up accountability before you get started on meeting metrics and goals,” says Linda Galindo, author of The 85% Solution: How Personal Accountability Guarantees Success. For example, Galindo suggests, tell your department heads, “In order to hit the mark, let’s agree that if your reports are not in on time, the information will be left blank, or I will insert what you will be committed to.” If you wait until later, you will get stuck like a lot of CFOs do, in a state of “begging, pleading, and being in highly frustrating ‘manager’ mode to get what is needed from their peers,” Galindo says.

Do not, however, confuse consequences with punishments that make department heads pay for their shortcomings. “Consequences will guide and focus department heads’ behavior and encourage them to take their commitments more seriously,” Holland says.

Market yourself and your department as resource. Think of finance as a resource, rather than the police department, says Galindo. You’re here to help, which in some cases may mean educating fellow managers who are not comfortable with financial matters at the same level as you. In fact, that may be one reason for missed deadlines. “The finance department should become educators and a resource to up everyone’s game in contributing by providing information that becomes knowledge to make wise strategic decisions going forward,” Galindo says.

One way to assist is to give other departments tools they can use (and know how to use) that can help them monitor results, on a monthly or quarterly basis. “They need some type of early warning system that will keep them focused,” says Joellen Sommer, owner of Your Own CFO, which offers part-time CFO services.

Measure progress. Measure ongoing progress and gauge whether or not department heads are on track to meet goals and expectations. “Variance analysis and making changes in plans to accomplish results are critical,” Holland says. “Goals are only measurable when they are quantified. Measure the results and compare them to department heads’ goals to discover the gaps that require further attention.”

Check yourself. Look at the quantifiable goals you set and determine if you were successful in holding your department heads accountable for reaching those goals. “Accountability is a big factor in business success,” Holland says. “Don’t make the mistake of thinking your department heads will figure out what they should do on their own. Help them achieve success for themselves and for your business.”

Moreover, review how you handled the process. In other words, hold yourself accountable for holding others accountable.

Sheryl Nance-Nash is a freelance writer specializing in personal finance, small business, general business, and career-related topics.