What comes first? Strategy or resource allocation? For most of us, the question is a little bit moot…because we’re in organizations that are already in business. Whether the organization is 10 years old or 100, most of us come into the picture after the budgeting process is well established and defined. What is more common is that after a while there is at least an attempt at a strategy change. Maybe a big one, maybe a small tweak…but a strategy change designed to kick start organizational effectiveness is very common. After all, if you realize that you’re not heading in the right direction, the only thing that makes sense is a new strategy. And that’s where there can be a significant problem.
Problems often arise when a new strategy is laid on top of a preexisting budgeting process. Legacy programs that expect to be funded can be tough to eliminate (or even decrease). The temptation is to simply fund the new strategy and continue to fund the old. Truth? It rarely works cleanly. Much more common in this compromise is that by sustaining the old the new strategy isn’t quite funded sufficiently.
Sound familiar? Here’s a line from The Innovator’s Guide to Growth: Putting Disruptive Innovation to Work that grabbed my attention:
"Remember, it is not your strategy that determines how you allocate resources; rather it is how you allocate resources that determines your strategy. In other words, the way in which you spend your time and money reflects your priorities. Claiming that innovation is important is meaningless if you and your organization don’t allocate appropriate resources to that end (p. 33)."
Moral of the story? Don’t kid yourself. Budgets and resource allocation are the truest reflections of priorities.