[SOUND] Hi there, we're back. In this session, we'll talk again about the concept of more planning versus more controlling. Now we'll a apply business level view of the connection between strategy and budget. Why? Because some approaches that apply to budgeting process demand strategic analysis outcomes. Look at this illustration that we use to support the discussions. So let's think about this decision on how to precision the company, in the middle of more planning or more controlling. Of course, I'm not saying the managers will decide where to position the company, to stay there. The company approach to planning and budgeting, can be one that allows flexibility to dynamically move towards one side to another. For example, managers of companies in dynamic sectors of the company may choose a lean, agile planning model. This approach for planning maybe recommended in situations when managers conclude that the efforts for accuracy in the plan don't pay back the diligence in developing the plan. So we're talking about keeping the plan options open and monitor the environment to respond rapidly. In this case, the focus is in the short term and rough plan will be done for the long term. Lean, agile planning is about being closer to the more controlling side, so the company would be to the left. Look at the figure, if the planner does a lean agile approach, then the budget will also follow the same method. And this would indicate that managers would be reviewing planning and budgeting more frequently. The monitoring system and knowledge management will be reinforced in the company. Lean, agile leads the company to have a light plan in the budget. Because a broad and extensive plan would certainly be a straight jacket for the company. Some scholars like Ralph Stacey argue that when turbulence and volatility are high, there may be no point in investing too much time in strategic planning. So the best approach to apply is to monitor and scan the environment and react rapidly to respond to an imminent threat. Guess what? He has a point, because the changing environment engulfs people that may have a cognitive bias, which is the illusion of control. A sector of the economy that presents such a dynamic is the Internet technology sector. In Internet industry, things change so fast that we may not realize what's going on. Well, let's move on to the other side of the coin, the side of more planning. The company would be located to the right side. In this approach, managers certainly have concluded that the business environment is relatively stable. Therefore, they can invest more time in planing and less in controlling. Now, a question that comes out of our minds at this point. Would you adopt the chaos and complexity model if the dynamics of the market were highly turbulent and volatile? Well, I don't know about you, but I'll tell you about me. I would, but only if the board of directors aligns with this approach. The risk of adopting this strategic manage approach are in two areas. First, despite any rational and supported explanation for the adoption of such approach, people is still are prone to the planning side. And let's not forget, either you or your senior managers have fiduciary responsibilities for the company performance. We don't want to hear the question, but didn't you prepare for that situation? Second, remind that the company may have relevant variables that don't present high variability. If this is the case, even having adopt a less planning approach, you should take care of these variables as much as you would do if you had adopted more planning side. But we still need something more prescriptive to support the decisions on where to position our budgeting approach. Check the variability of the most relevant variables in this scope of the budget. Look at this chart, you can evaluate the variables. And by positioning them in the chart, you can assess which ones should have a close attention. The ones in red are the primary candidates. The ones in blue could be the second in the line. Common sense would tell us to apply more planning to variables with high relevance and low variability. And more control into variables with high relevance and high variability. But, maybe we have an additional upside from checking the variables for their relevance and variability. We might be able to analyse the viability of mixing approaches. Like for example, more planning for the variables with high variability and relevance, and controlling for the variables with low variability and high relevance. Of course, this might not be possible for all variables. Nonetheless, you may benefit from analyzing the variables with this technique. Well, we have concluded our discussion on strategy and cooperate budgeting. The next session will be about governance aspects in budgeting. Thank you for your attention, please follow the steps of the course. Stay tuned, and see you soon, bye. [SOUND]
