Budgeting is key to boost competitiveness as it aims to optimize the alignment of resource allocation with strategic goals. As for re-engineering, making effective resource allocation decisions requires a deep analysis of which activities should be eliminated, which activities should be performed, and how to perform these activities. It requires a quantitative costs/benefits analysis of alternative options such as automation, streamlining, standardization, outsourcing, offshoring. As for many financial estimation techniques (see chapter x), the ROI of certain activities such as R&D can be difficult to estimate and might only make sense if the client is receptive to long-term returns.
- Identify clear strategic plans and cost targets
- List facts and figures for the different activities and business units, including all expenditures and how they relate to revenue streams
- Define an “ideal” state and essential activities
- Optimize and/or reengineer/redesign the future state and set of activities
- Ensure client acceptance and reset budget accordingly