Forecasts and Budgets 175Periodic Planning
Virtually all organizations require some planning to ensure efficient and effec-
tive use of scarce resources. Some managers are compulsive planners who con-
tinuously update plans that have already been made and plan for new activities
and functions. At the other extreme are people who do not like to plan at all
and, therefore, find little or no time to get involved in the planning process.
The budgeting process closes the gap between these two extremes by creating
a formal planning framework that provides specific, uniform periodic dead-
lines for each phase of the planning process. People who are not attuned to this
process must still meet budget deadlines. Of course, planning does not guaran-
tee success. People must still execute the plans, but budgeting is an important
prerequisite to the accomplishment of many activities.
Coordination, Cooperation, and Communication
Planning by individual managers does not ensure an optimum plan for the en-
tire organization. The budgeting process, however, provides a vehicle for the
exchange of ideas and objectives among people in an organization’s various seg-
ments. The budget review process and other budget communication networks
should minimize redundant and counterproductive programs by the time the
final budget is approved.
Quantification
Because we live in a world of limited resources, virtually all individuals and or-
ganizations must ration their resources. The rationing process is easier for some
than for others. Each person and each organization must compare the costs and
benefits of each potential project or activity and choose those that result in the
most efficient resource allocation.
Measuring costs and benefits requires some degree of quantification.
Profit-oriented firms make dollar measurements for both costs and benefits.
This is not always an easy task. For example, the benefits of an advertising cam-
paign are increased sales and a better company image, but it is difficult to esti-
mate precisely the additional sales revenue caused by a particular advertising
campaign, and it is even more difficult to quantify the improvements in the com-
pany image. In nonprofit organizations such as government agencies, quantifica-
tion of benefits can be even more difficult. For example, how does one quantify
the benefits of better police protection, more music programs at the city park,
or better fire protection, and how should the benefits be evaluated in allocating
resources to each activity? Despite the difficulties, resource-allocation decisions
necessitate some reasonable quantification of the costs and benefits of the vari-
ous projects under consideration.