Join us on this episode of the Agile People Fika podcast, where we
explore the intriguing subject of ‘What are the drawbacks of having
overly specific financial objectives’. This engaging discussion explores
the complexities and potential pitfalls of setting highly specific financial
goals within organizations.
Our conversation opens with reflections on traditional accounting
practices and the resistance to change often encountered in the field of
finance. The panel, including an ex-accountant, discusses how outdated
methods persist in budgeting and management, highlighting the
reluctance to adopt new approaches despite evident inefficiencies.
We then shift to examining human behavior in organizations, particularly
how adding complexity to problems often leads to short-sighted
solutions. This is especially true in finance, where traditional values and
practices are deeply ingrained. The conversation underscores the
challenges of encouraging people to think creatively and adopt new
methods, particularly in areas like budgeting and management.
A significant part of the discussion focuses on the drawbacks of overly
specific financial targets. These rigid objectives can lead to unethical
behaviors, such as gaming the system, and foster a short-term mindset
that undermines long-term organizational health. Specific examples are
cited, illustrating how rigid financial goals can disconnect from the real-
world context of a product or service, leading to counterproductive measures.
The conversation then turns to performance management, especially in
relation to financial objectives. The panelists discuss how managers
often engage in counterproductive actions to meet financial goals linked
to their performance bonuses. This leads to a broader discussion on the
limitations of checklist-driven approaches in finance, where ticking off
tasks can overshadow the holistic impact of actions.
Towards the end of the discussion, the panel introduces the concept of
‘beyond budgeting’. This approach involves breaking the link between
annual budgets, fixed performance targets, and rewards, advocating for
a more dynamic and responsive financial planning process. This
method recognizes the need for agility in resource allocation and
decision-making, moving away from the rigid structures of traditional
budgeting.
The podcast wraps up with reflections on the role of HR and finance as
key enablers of organizational agility. The need for these departments to
collaborate more closely is emphasized, suggesting that joint efforts
could be a crucial step in advancing agile practices within organizations.
Overall, this episode of Agile People Fika offers a deep dive into the
challenges and potential solutions for moving beyond traditional
financial objectives, highlighting the importance of agility
