Schrodinger's Cat-Executive Paradox of Budgeting
For enterprises, budgeting activity is a long drawn activity and needs multiple stakeholders involved to finalize. And then there are multiple versions of budgets that are drawn – like External Guidance, Internal Stretch Targets, AOP etc. Once the budgets are frozen, at the start of a business year, the mindset of the business is to perform it’s best and achieve all the set goals.
Though Budgets are all set and finalized with best of intentions, it always is like Schrodinger’s Cat Paradox. So what is the paradox?
Erwin Schrodinger proposed an experiment, where a living cat is placed in a steel chamber with a hammer, a bottle of hydrocyanic acid, and a trace quantity of radioactive material. In the experiment, the observer has no way of knowing whether or not an atom of the material has decomposed, and hence has no way of knowing whether or not the vial has cracked and the cat has been killed. Now the cat can be both dead and alive until someone looks in the box. The cat's capacity to be both alive and dead until detected is referred to as the paradox.
At the start of the year, Budgets/Business Plans are like the Paradox. We are both Dead and Alive meaning we have met the plan and also we have not when we start the year!!! There are factors that businesses do not control which could make all budgets to be in out of sync with reality.
Though we cannot break the paradox when we start the year, an efficient, effective and frequent forecasting process could give visibility earlier. So, the idea is to move away from the zone of the Cat being both Dead & Alive to being either Dead or Alive – but not both. Sooner we can break the paradox, the better it will be for the long term performance. Automated Forecasting supported by QuarkCube platform provides an opportunity for businesses to not only streamline their forecasting process but also break the paradox early
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