Budget Cut and Paste

Quick Insight

The business environment is constantly changing, but most companies rarely change how they spend money. Investing in change could increase performance.

Many business leaders spend countless hours in the budget process. Was it time well spent? Did they escape inertia to invest in a bold new strategy?

McKinsey looked at the year-to-year capital allocations to business units by 1,600 large companies. They found:

For one-third of those businesses, there was basically no change year-to-year
On average, the allocation was about 92% the same.
The 1/3 of companies that shifted the most resources (56% on average) earned a 30% higher stockholder return than the companies in the first bullet.
How are you investing money in your business versus last year? If you’re like most companies, the answer is the same. All your strategy work led to a budget that was basically copied from last year.

Maybe you're one of the top third that’s constantly changing investments to meet a changing business environment. It’s hard work, but it could lead to huge increases in performance.

- Rob Stephens
Founder of CFO Perspective and the Finance and Strategy Toolkit (FAST)

Further Insight

How to put your money where your strategy is on McKinsey & Company
How nimble resource allocation can double your company’s value on McKinsey & Company

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