It’s budget season, which means there is a flood of fresh content coming out to help boards and management navigate the process more easily.
….And I have to confess, I’m tired of seeing the same budget advice.
Start the process early! Send materials in advance of meetings, come prepared to ask questions. Stay out of the weeds and keep the conversation strategic and centered on the mission… Here’s a recommended process timeline, and policies you need to get in place, and a checklist of questions to ask and red flags to look out for.
To be clear, it’s not bad advice… but it is a beaten path. Most of it treats budgeting as a technical problem to solve and forgets the human factors, failing to offer solutions for the actual pain points causing strain:
A process so time-intensive and stressful it distracts from other critical work and burns people out.
A lack of literacy that prevents conversation beyond surface-level.
Personal feelings and private interests derailing or undermining strategic discussion.
At this point in my career, I’ve been through organizational budgeting at 13 different organizations, on both sides of the table: as chief executive and as board president. I’ve had to build and pitch budgets, as well as act as a governor. I also had to figure out how to bring along boards that were newly formed, or going through crisis, or checked out and trying to check back in.
Through it all, I’ve learned following three lessons that turned budgeting from a pain in the butt into a process that’s in better service of the mission.. and the people managing the numbers.
Lesson 1: Don’t over-engineer
I considered titling this section: stop wasting leadership’s time, but felt that might be too hot of a take out the gate. The reality is, organizations sink an outsized amount of time into the budget process, only to end up with a final product that reality is going to derail in Q1 anyway.
Standard advice is to start early… and I’ve seen organizations take that a little too much to heart, launching into exercises 6 months out from date of delivery. Meetings fill up the calendar, the committee demands multiple, detailed iterations (4, 5, 6x), and management time is taken over in the pursuit to get ‘accurate’ numbers.
It might feel very prudent and fiscally responsible in the moment to be devoting so much time to this endeavor, but that investment of time comes at an opportunity cost: time not spent on advancing current strategic initiatives.
⭐The Lesson: Don’t over engineer the process, or the numbers.
Scale time being invested in the budget process to fit the volatile nature of the deliverable.
Some Tactics for your Toolbox:
Rightsize the process to the value of the product.
All organizations deviate from their budget. All. 100%. No, you are not the exception. The world is dynamic and, most importantly, unpredictable. You need to scale the time being invested in the budget process to fit this reality. It’s a waste of resources to spend 6 months working on a one-year budget. Two or three iterations of a budget is plenty to generate the big conversations your organization needs.Sink time into the Big Tickets.
Don’t waste your energy debating how much to spend on office supplies. If it makes up less than 5% of your budget, it probably can be cast forward with minimal fuss and left to be. Instead, focus your analytical horsepower on the 5—7 major cost drivers and revenue assumptions in your budget that most notably impact your organization, and build in a contingency for things that might shift.Focus on the assumptions
Every budget is built on assumptions about the business environment: customer and donor behaviors, enrollment targets, trends in the sector etc. Once you have a number, use your time pressure testing the underlying assumptions rather than tweaking the calcs.
Lesson 2: Treat it as a teaching moment
For many organizations, the budget process runs almost entirely through the finance committee, with the full board getting a high level run through before a rubber stamp at the very end. The rest of the board doesn’t engage deeply, and they can’t: they don’t have enough context, or time with the numbers, or familiarity with the risks, tradeoffs, and trends to give useful input.
This is a governance failure, and a major missed opportunity. You recruited a diverse board for diverse perspectives. When only a small subset has the time and org knowledge to ask questions, all that expertise you spent time gathering in the room is left underleveraged.
⭐The Rule: Treat the budget as a teaching moment.
Aim to raise collective financial literacy each year through the budget process. Educate the whole board on industry trends, enterprise risks, and strategic priorities, and equip directors to be better governors.
Some Tactics for your Toolbox:
Storytelling, not accounting.
If your financial reports require a CPA to decipher, you’ve failed. Your numbers need to be digestible if you hope to generate strategic conversation. Require dashboards, visuals, and distilled executive narratives. Flag points of discussion and make sure directors understand the story behind the numbers.Prime the board.
Don’t assume people know how to read and interpret the numbers at your org. Before the high-stakes budget vote, schedule a low-stakes orientation for new board members (and veterans who want a refresher). Prime directors on industry trends, macroeconomic shifts, regulatory changes driving assumptions that year, and then walk them through how your revenue streams work, what drives expenses, and the status of reserves and investments. This ensures everyone has the same baseline before the bigger discussions begin.No surprise approvals.
The first time the full board sees the budget should not be the day they are asked to approve it. Socialize a draft early and give directors time to digest the materials, formulate questions, and have conversations with leadership before the board meeting.
Lesson 3: Factor for human nature
The Boardroom (and the budget process) is complicated because people are complicated. Rarely are board directors just directors. They are also major donors, investors, beneficiaries, customers, or community members, impacted one way or another by board decisions.
So while directors are legally obligated to act in the best interest of the organization, human nature is not that obedient. People will champion the programs they love, or cling to the way things have always been done, or look to protect their reputation. They might choose to stay loyal to the executive because they’re friends, or take up an issue against them out of personal dislike.
Conflict avoidance. Power dynamics. Personal feelings. Hidden agendas… All these things, and more, inevitably govern behavior, and if you ignore these dynamics, you will end up derailed.
⭐The Rule: Manage human dynamics as rigorously as you manage the math.
Some Tactics for your Toolbox:
Work behind the scenes
Leadership likely knows which budget decisions will be felt personally by different directors. Executives and board officers need to work together to socialize tough decisions before they hit the big room. This isn’t about stifling legitimate objections or backroom dealing. Rather, its about giving people a safer space to have their personal feelings heard. When people feel heard, they are much more capable of setting their feelings aside in the interest of the org in the more public setting.The chair must control the room
If a director starts defending their pet project, or the conversation gets entrenched in the ‘we’ve tried that before’ loop, or things take a turn for the personal, the board chair needs to redirect the conversation back to institutional strategy. It takes courage, but without this type of firm facilitation, the budget quickly becomes a proxy war for a wide array of personal agendas.Name the hats
One way to diffuse tension is to explicitly name the different “hats” people are wearing, as a way of acknowledging and managing bias head-on. People can’t ignore unspoken motivations when they are named out loud. Even something as simple as, ‘I know many of us in this room have personal ties to this program, but let’s make sure we are committed to looking at the data objectively’. This small shift is especially important when there are hard decisions and cuts on the table, and emotions are high.
A final thought
I’ve sat in boardrooms where the budget was a nightmare of iterations and passive-aggressive politics and burnout… and I’ve sat in rooms where it was a thoughtfully managed strategic conversation that left everyone aligned and energized.
When I reflect on the things that made the difference, it wasn’t the scale of the organization or its state of affairs or the number of iterations or the size of its committee. It was an organization that ran a right-sized, tight process, lifted the board and brought them along, and took care of the human side of things.
Good luck and happy budgeting!