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Collaborative Budgeting: Setting the Tone

In my first Budgeting for Nonprofits post, I emphasized the importance of collaborative budgeting, especially for nonprofits. Collaborative budgeting should be the norm, but in most cases you get a single person dictating budgets from the top-down.

This is true, even in smaller organizations that otherwise value teamwork, community buy-in, and mission-driven collaboration. With the right approach, those values can work for budgets, too.

Unfortunately, we see many more examples of budgets as a source of conflict rather than of collaboration. Take politics: Debates about where government resources go are framed around who is deserving and undeserving, and partisan views of waste versus necessity.

Beyond these public bad examples, people have complicated, emotional relationships with money. We need to ensure that we aren’t perpetuating any of that, so let’s discuss setting tone and expectations for effective collaborative budgeting.

Setting Yourself Up for Success by Setting the Right Tone

There is always someone responsible for authoring the final document, and that person is also generally the one leading the budgetary process. For the purposes of this blog, we’ll assume that it is you.

As the author of the budget, you need to have conversations with individuals throughout the organization to find out what they are working on, where their biggest and most common expenses are, and what they project coming expenses to be. Your partners in these discussions need to feel secure if you want complete, honest answers.

This starts with you having the right mindset, remembering that the budget is an extension of your mission, and a powerful tool to keep it on track.

Maintain your confidence and excitement about the mission.

Don’t let fear of scarcity enter your tone, even when budgets are limited.

Avoid Projecting Fear of Scarcity into These Conversations

It is very easy for budget architects to come at the task by asking people to justify their expenses and even their existence within the org, rather than just getting the facts. In this aggressive dynamic, people will be less candid and more fearful about how they respond, and the quality of information you get in these interactions will be poorer.

Furthermore, if the tone of these conversations is one of fear and scarcity, then people will demur about what they actually want, need, and aspire to see. You will get a path to maintain the status quo at best, and everyone will miss an opportunity to generate new ideas.

The budgeting process can absolutely include addressing higher-than-expected expenses as a group. Instead of simply saying, “You are spending too much here, and you need to figure out how to do this same thing with less,” use the collaborative budgeting process to facilitate other conversations. People on different tasks and teams might already have solutions.

Collaborative Budgeting Is a Path to Growth and Innovation

Set aside time in your budgetary conversations to ask people, “If you had all the resources you needed, what would you implement next in support of the organization’s mission?” Find out the dreams and goals that they have for their part in the org, even if they don’t see the path forward just yet.

Maybe these ideas are currently unattainable, but letting people share them is important for multiple reasons. Write these ideas as future goals into the supporting text of the document.

Make sure people feel seen and heard, and people working on different things may find new reasons to work together.

Set The Team Up for Success by Setting the Right Expectations

As important as it is for you to understand the benefits of collaborative budgeting, the whole team (not just decision-makers) should have the concept, too. Before the budgetary process begins in earnest, communicate as a group all the ways that the budget is a tool for the whole organization.

This sense of shared power and agency over the budget will make your initial conversations about money less awkward and scary for everyone. It will also give them time to think about the questions you will be asking, so they can give more complete and reasoned answers.

Be candid about your current resources, so that no one feels led on when asked about these reach goals. Feel free to state, “This is what we think we will have coming in realistically, and here are our reserves.” Just let them know that even if big new ideas and ideas can’t be executed right away, you are all building toward that possibility.

In the meantime, do identify intermediate goals that you can achieve with a little extra capital, because you may just have it sooner than expected.

Understand That a Budget Is a Living Document

Yes, the budget is approved at the start of the year, but don’t put it away after that, or assume that it is written in stone. You should be regularly checking in on where you are achieving and where you are falling short as a team. Collaborative budgeting is an ongoing process that allows people across the org, and everyone needs to be in on that fact.

You can even set a plan to evaluate and amend if necessary two quarters into the year. If you have concerns about expenses or income, call attention sooner than later. Give people the opportunity to react and work on solutions as a team, rather than scrambling and blaming at the eleventh hour.

Of course, what we really hope is that the income will actually increase more than anticipated. If so, I recommend pushing that into your reserves rather than finding places to spend it immediately.

Never Underestimate the Importance of Having Reserves

If possible, some portion of revenue should always go to reserves. How does this relate to collaborative budgeting? Well, for one, if people see that the org isn’t running hand-to-mouth, it inspires confidence that the leadership sees a bigger future for the organization and isn’t acting hastily.

Reserves are a powerful means to provide long term stability, both in how they eventually get spent and the psychological effect of having them.

And when it does come time to spend some of those reserves, your budget will be there to guide you, because you will have already been documenting ways to expand operations and growth with key members across the organization. Those intermediate and reach goals that you have been hearing about can finally start becoming a reality.

Collaborative Budgeting Takes Out a Lot of Uncertainty

Budget architects working on their own can feel enormous pressure to just get something done, and the result is often a budget informed by a lot of guesswork rather than real info. Despite taking a lot of time, the budget gets shoved into a file and ignored in part because no one wants to be held accountable to a document made in such a manner.

Collaborative budgeting takes out that guesswork with a shared, comprehensive view of your org’s operations.

Because its values were determined collectively, this kind of budget has a long and productive shelf-life before it gets archived. People will want to refer to it and even out-perform the expectations they set for themselves in pursuit of bigger goals.

And finally, because collaborative budgeting means that everyone will be interfacing with you directly in the process, it also means they will have more certainty one way or the other about whether you are up to the task and what you really believe. So again, make sure that you are projecting confidence in the organization and its members in each of these discussions. Set the right tone and expectations, and your role in leading the collaborative budgeting process will reward you with greater insight into the team, respect from them, and hope for your shared vision.

1 Comment

  1. Carlo

    This is the most comprehensive article on budgeting I have ever read. It makes so much sense and yet very few org will budget in a collaborative way.
    It gives people in the org, at all levels, the pride of being part of the org’s mission, working WITH the org rather than working FOR the org.

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