Chen Chunhua: In a complex business environment, effective budget management requires managers to change 4 habits

Many companies do not lack goals or plans at the strategic level, but when it comes to implementation, results often fall short of expectations. One important reason is that budgeting and control are not truly effective.

Budgeting is the foundation for executing plans. Budget control is not about “saving money,” but about “ensuring every dollar invested supports the strategy.” The ability to manage budgets effectively directly impacts whether strategies are successfully implemented.

1. The Foundation of Business Development: Effective Budgeting and Control

The true foundation for a company’s growth is proper budgeting and control.

Budgeting is essentially a digitalized plan. By preparing a budget, companies can clarify which matters are most important and how much resources to allocate, focusing resources on achieving goals. At this stage, the budget also serves as an execution standard.

The classic case of Southwest Airlines in the U.S. provides great insight into budgeting and control. This case, summarized by W. Chan Kim and others as value innovation, fundamentally involved effective cost planning.

Most airlines focus on six elements: catering, lounge facilities, cabin classes, transfer hubs, friendly service, and speed. Southwest Airlines reduced attention to four of these elements, concentrating the saved costs on the remaining two—friendly service and speed—and on the new element of frequent point-to-point direct flights, which are key customer value points.

As a result, Southwest Airlines not only controlled its budget investments well but also generated greater value from those investments, winning more customers. When competitors were losing money, Southwest was profitable.

This case is worth serious reflection and learning. It inspires us to understand how to truly implement budgeting and control—not just for the sake of budgeting and control, but to ensure business performance.

Today, most companies are implementing comprehensive budget management. However, based on practical observations, achieving real results requires changing four habits.

2. Mindset Habit: The Starting Point of Budgeting Is Strategy

To manage effective budgeting and control, the first step is to change thinking habits.

Don’t see budgeting as solely a finance department task or as a simple compilation of numbers. The most important aspect of budgeting is mindset.

Many managers believe that environment, market conditions, company history, and industry determine the budget. This is a misconception. The true driver of the budget is the company’s strategic goals.

Budgeting should start from strategic objectives, not from completed financial targets. If the budget does not originate from strategic goals, it is inherently misaligned.

Therefore, our thinking must shift to recognize that “planning precedes success.”

3. Behavioral Habit: Resource Investment Must Align with Plans and Goals

In observing management habits, two behaviors stand out as particularly interesting.

The first is a preference for reviewing historical performance. Many companies habitually compare their growth to last year. From exemplary companies, we see this is incorrect. Companies should compare themselves to industry averages or benchmarks, not just last year’s results.

The second is a reluctance to explore the connection between actual conditions and plans or goals. Without understanding this link, how can plans and goals be achieved? We need to be clear on questions like: What are we doing? What are the key factors to increase market share? Once these are understood, behaviors will change accordingly, and the purpose of budgeting and assessment becomes clearer.

Beyond these two habits, a new habit must be cultivated: implementing comprehensive budget management.

All resources should be allocated where they can generate value and support plan and goal achievement. Conversely, resources should not be invested in areas that do not create value or are unrelated to objectives. Only then is budgeting truly useful. Resources should be mobilized only when they can produce benefits. Developing this habit is crucial.

4. Evaluation Habit: Don’t Rely Solely on KPIs and Financial Data

The third habit to change in budget control management is evaluation.

After observing many companies, it’s clear that managers often evaluate performance using only financial indicators, rather than operational standards. They understand financial metrics well but overlook other standards set to achieve plans and goals, such as operational and process standards.

People tend to focus only on KPIs. On the surface, this seems reasonable. But relying solely on KPIs can lead to neglecting areas without KPIs, causing control biases.

I do not agree with focusing only on KPIs because not all elements can be expressed through KPIs. Many process factors are difficult to quantify with KPIs. This is why internal control is so important—it’s a process in itself.

Managers should develop the habit of evaluating based on the achievement of plans and goals, implementing comprehensive plan management rather than just focusing on KPIs and financial figures.

5. Dialogue Habit: Establish a Common Standard

The core of budget control management is that organizational levels must develop a shared dialogue system using common standards.

Having a shared dialogue system ensures everyone uses the same standards, focuses on the same key elements, and shares the same understanding. This makes management much easier to comprehend, facilitates consensus, and helps solve problems.

Often, internal disagreements are not solely due to cultural issues but stem from the lack of a common standard. Without a unified evaluation system, assessments are inconsistent, making dialogue and consensus impossible.

Organizational learning is a very effective way to address this. That’s why I advocate that managers become knowledge coaches—using learning to help the organization develop a shared language.

Budget control is not an isolated management tool but a reflection of a set of management habits. When managers truly change their thinking, behaviors, evaluation, and dialogue methods, budgets can become a powerful force for strategy implementation.

These four habit changes essentially represent a transition for managers from resource allocators to value managers—aligning with the concept of symbiotic leadership emphasizing “holistic altruism and value co-creation.” The core of budget control is to focus resources on value, foster organizational consensus, and support strategy execution through collaboration.