What did I learn
The Body Glove case looks at the importance of planning and budgeting (setting strategic goals). For
Body Glove specifically, in order to ensure adequate inventory is held during specific periods (in their case seasonally) and also so that costs associated with manufacturing can be controlled through regular reviews in order to maximise business profitability.
I have learnt from this case the importance of budgeting and control processes in achieving the organisations goals, the behavioural issues in the budgeting process, the reasons we should engage key people in the budgeting process, how budgeting allows for control of operational performance, how the balanced scorecard approach covers other important aspects of the business rather than simply financials and how the budget in effect is a measure of the strategic plan.
The importance of budgeting and control processes in achieving the organisations goals –
The budget gives “direction” to the business so that it can stay on track to achieve the organisational goals.As in Body Gloves case they consistently ran out of stock in spring as they did not hold enough materials. They didn’t set the target or direction for the business so therefore they continually made the same mistakes.
How the budget in effect is a measure of the strategic plan-
The budget allows for the strategic plan to be put in measureable terms for Managers to work towards. It must be measureable and also achievable otherwise people will “give up” if they think they can’t win! The budget must cover seasonal or cyclical swings and in effect is the “goal” to which employees and Managers aim to achieve.
The behavioural issues in the budgeting process -
I see the bottom up approach to budgeting as a positive step to gaining “buy in” from the rest of the team. Giving them a number to work to without allowing input from them may have them “off side” before the budget period starts. Budgetary slack may occur for various reasons. Managers like to achieve or exceed budget for reasons such as recognition, promotional opportunities and “bonus” payments. Budgetary slack can be managed by comparisons to previous years and incorporating strategic plans into the budget.
The reasons we should engage key people in the budgeting process -
We should engage key people in the budget process for reasons similar to above, in order to “gain buy in” but more importantly so that we can prepare an accurate budget. If the General Manager prepares the budget without input from the Sales Manager or Plant Manager, firstly he/she will have no “buy in” but also may have missed relevant information from these key people.
Budgeting allows for control of operational performance -
The budget should be used as a regular measure of business performance. If the budget has been set correctly it should be used as a comparison against current performance and variances should be addressed. This way the Manager can ensure that his strategic plans are firstly being implemented

and hopefully working or if they are not working they have a chance to change the strategy in order to recover as fast as possible.
How the balanced scorecard approach covers other important aspects of the business rather than simply financials –
I like the Balanced Scorecard approach as it not only covers the financial budgeted performance of the business but it also covers other key business objectives which if not prioritised can lead to future poor business performance. These KPI’s (Key performance indicators) can predetermine future financial performance if managed well.
Applicability in my workplace
As the General Manager of XXXXXXX,we incorporate a comprehensive annual budget with a 5 year strategic and capital plan which also details last years financial performance. The next budget period is compared to the previous year and any major variances are reported on in the budget commentary. We are given data of Building consents forecasts from our head office in order to estimate future sales volume numbers and strategies are set in order to either gain market share or increase price to certain markets. Production targets are set based on production volume required to fulfil local, interstate transfers and export sales. The production targets vary dependant on overall stock situation in the yard with a focus on cash generation. A monthly budget is calculated which includes reduction in sales volume over the winter months, as rain affects operations.
As a reasonably large organisation being part of the XXXXX group, we have set structures in place and templates to adhere to in order to combine for a total business budget. The main additional learning for me has been the balanced scorecard approach which I believe we can use to put a more strategic plan together based on our customers and employee engagement and growth. For future budgets I plan on engaging the key personnel from my South Australian team to assist in putting the budget together and have them discuss with their teams their strategies for business improvement.
This I would like to then have discussed at a strategy review and budgeting meeting whereby I would gain input and “buy in” from my direct management team. In essence,going even deeper into the organisation for a true “bottom up” budget.
Once the budget is set and we are in the budget period, all divisions submit a weekly profit estimate against budget and compare to last year on a line by line basis. It is quite time consuming however it certainly keeps all Managers in control of their budgets and gives our Managing Director a true perspective of each individual businesses current performance. The accountants then prepare a monthly performance summary against budget and last year and we report on this at a monthly
Directors meeting. Although the budget will not change, if the business budget is not being achieved it gives the Manager an opportunity to rethink the strategies and change them in order to recover.