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Strategic Budgeting

Suresh

By Dr Suresh Vidyasagar Menon-Chief Consultant & Business Advisory for Six Sigma, Operations, Strategic Management and Information Security

The main instrument for resource allocation is a budget. Budget is a common technique used as planning, coordination and control device in management. Its usage is widespread in organizations, but apart from traditional budgeting where stress is on accounting, a budget is increasingly used a dynamic management tool.

Factors affecting resource allocation: –

  1. Preference of dominant strategists: The dominant strategists-most often the chief executive officer tend to affect the process of resource allocation. Their preferences are reflected in the way how resources get allocated.
  2. External Influences: Apart from Internal politics, external influences also affect resource allocation, these influences arise due to government policy, the demands of external shareholders, financial institutions, community and others. The shareholders may expect a higher dividend or bonus and resources may have to be diverted to them. Financial institutions may impose restrictions or require companies to invest in technology upgradation.

Difficulties in Resource Allocation

  1. The major difficulties arise due to scarcity of resources financial, human and physical resources are hard to find.
  2. Overstatement of needs another frequent problem especially in bottom-up approach is the overstatement of need for resources and budget battles may ensue if resource allocation affects vested interest.
  3. Tendency to imitate competitors – it is interesting to observe that companies in an industry tend to imitate their competitors in terms of resource allocation, no wonder companies in an industry are so alike internally but this is not a good practice if the competitor company changes its entire strategy.

As known the CEO has a major role to play in managing the process of resource allocation, a well laid out strategic plan should be communicated to all executives which creates a congenial environment where the resource allocation decisions may be taken amicably.

Having done the resource allocation, the strategist has to move now to other aspect of strategic implementation i.e. Structural Implementation.

In Structural Implementation the strategist has to grapple with the complexities of creating the structure, making it work, redesigning when required and implementing changes that will keep the structure relevant to the needs of strategies and external and internal environment. A strategic plan lays down the formulated strategies, these strategies have to be implemented to achieve the objectives.

Moreover, we can use Information Technology tools like Microsoft Project, Opensource Tools, ERP Systems this can be allocated to resources below the hierarchy who will be able to manage better in an automated environment.

Below the hierarchy of the CIO mostly all big FMCG’s, Software and Pharmaceutical Companies use Project Management software and ERP software for managing budgets in an automated way.

Now Trending is Artificial Intelligence so it is better to harness the power of AI in laying out strategic plans and thereby implementing them.

About the author:

Dr Suresh Vidyasagar Menon has 31 years plus of overall experience in IT, around 3 Years in Auditing of ISO 27001-Information Security Standard , has executed 25 plus projects in IT and two turnkey projects for eastern railways (Liluah) and has to his credit twelve publications in International Journals of Science, Engineering & Technology.

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