Exotic Newcastle Disease, one of the most infectious bird diseases in the world, kills so swiftly that many victims die before any symptoms appear. When it broke out in Southern California two years ago, it could have spelled disaster for the San Diego Zoo.
"We have one of the most valuable collections of birds in the world, if not the most valuable," says Paula Brock, CFO of the Zoological Society of San Diego, which operates the zoo. As state authorities ordered the slaughter of millions of chickens, and federal agents went door-to-door killing household parrots and other feathered pets on the spot, keeping the disease out of the zoo and its nearby Wild Animal Park became an enormous unbudgeted expense.
Bird exhibits were shut to the public for several months (the disease, which is harmless to humans, can be carried on clothes and shoes). The tires of arriving delivery trucks were sanitized, as were the shoes of anyone visiting the zoo's nonpublic areas. Zookeeper uniforms had to be changed and cleaned daily. And ultimately, the zoo, with $150 million in revenues, spent almost half a million dollars on quarantine measures in 2003.
It worked: no birds got sick. Better yet, the damage to the rest of the zoo's budget was minimized by another protective measure: the monthly budget reforecast. "When we get a hit like this, we still have to find a way to make our bottom line," says Brock. Historically, zoo scientists would have been far more worried about the disease's effect on their budgies than their budgets. But thanks to new planning processes Brock had introduced a year earlier, the zoo's scientists were able to raise the financial alarm as they redirected resources to ward off the disease. "Because we had timely awareness," she says, "we were able to make adjustments to weather the storm."
Budget reforecasting is nothing new. (The San Diego Zoo's annual static budget was behind the times before Brock took over as CFO in 2001.) But the reaction of the zoo's staff shows the benefits of Brock's immediate efforts to link strategy to the process. It's a move long touted by consultants as a key way to improve people's involvement in budgeting.
"To keep your company on a path, it has to have some kind of map," says Brock. "The budgeting-and-planning process is that map. I cannot imagine an organization feeling in control if it didn't have that sort of discipline."
A Little Better All the Time
When CFO magazine examined the state of corporate budgeting and planning (B&P) seven years ago, the only common ground between finance and operating units was that they all hated the process. Line managers saw B&P as an irrelevant and time-consuming data-entry project. It was equally cumbersome for finance departments, which distrusted the results. And both sides despised the ensuing numbers negotiations, which tended to reward the most politically savvy hagglers.
Back in 1998, the consultants' general prescription for fixing B&P was threefold: simplify it, share the information widely, and link it tightly to strategy. Technology helps, but the key to success is making people accountable.
Finding a cure hasn't been easy. But the good news, as the San Diego Zoo demonstrates, is that the prescription applies to companies and organizations of all sizes. Seven years ago, only a handful of large companies dared embark on what experts termed "the ultimate reengineering project." And although the fixes vary, one thing is clear: "Companies of all kinds are doing a better job of getting line managers, whose decisions drive spending and revenue, to participate willingly in the process," says The Buttonwood Group LLP's Lawrence Serven, who wrote CFO's 1998 survey and helped design the current one.
That buy-in has had a dramatic effect. Today, according to CFO's survey of 260 finance executives, almost half (47 percent) believe most employees are completely satisfied with the B&P process, compared with just 16 percent who thought so in 1998. And the number who say the value of the B&P process clearly outweighs the cost in time and effort has also increased, from 47 percent to 65 percent.
That's not to say Corporate America has tamed the budgeting beast. "It's great to see progress, though perhaps with the mountain of articles and seminars and software offerings over the years, we would expect to be even further ahead," says Serven. For one thing, he warns, "this more favorable view of B&P is not necessarily the result of improved reliability." Indeed, perceived reliability has fallen somewhat: on a scale of 1 to 4 (where 1 is "Not at all" and 4 is "Completely"), CFOs gave the process a 2.9 for reliability in 1998 versus just 2.5 today.
Moreover, politics still dog the process. Even today, a majority of respondents told CFO that office politics had some influence. "The politics are always going to be there," says Serven. But as the technology has improved, he adds, it has helped companies achieve certain basic best practices, such as identifying the key drivers of the business and attaching long- and short-term targets to those drivers. "Transparency [on those issues] goes a long way toward reducing the politics."
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