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 have not truly been 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

A company’s true development depends on good budgeting and control.

Budgeting is essentially a digital plan. By preparing a budget, you clarify which items are most important and how much resources to allocate to them, 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 effective 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 services, cabin classes, transfer hubs, friendly service, and speed. Southwest Airlines reduced attention to four of these elements, concentrating the saved costs on two key elements—friendly service and speed—and on the new element of frequent point-to-point direct flights, which are critical 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: Budgeting Starts with Strategy

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

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

Many managers believe that environment, market conditions, company history, and the market determine the budget. This is a misconception. What truly determines the budget are 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, we must change our thinking: “Plan first, then act.”

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 tendency to focus on historical performance. Many companies habitually evaluate their growth compared to last year. From the perspective of top-performing companies, this habit is flawed. Companies should compare themselves to industry averages or benchmark against competitors, not just against their own past results.

The second habit is a reluctance to connect actual conditions with plans and goals. Without understanding this connection, how can plans and goals be achieved? We need to be clear: What are we doing? What are the key factors to increase market share? Once these are understood, behaviors will change accordingly, and it will be clear what budgeting and assessments are for.

Beyond these two habits, a new habit must be developed: practicing comprehensive budget management.

All resources should be allocated where they can create value and support the achievement of plans and goals. In other words, resources should not be invested in areas that do not generate value or are unrelated to strategic objectives. Only then will budgets be truly useful. Resources should be mobilized only when they can generate benefits. Cultivating 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 focusing solely on KPIs can lead to neglect in areas without KPIs. This creates bias in control and evaluation.

I do not agree with only discussing KPIs because not all elements can be expressed through KPIs. Many process factors are difficult to quantify with KPIs. That’s why internal control is a process 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 communication should be based on a shared dialogue system and common standards.

Having a shared dialogue system allows everyone to use the same standards, focus on the same key elements, and share the same understanding. This makes management much easier to comprehend and helps reach consensus. With consensus, problems can be effectively addressed.

Often, internal disagreements are not solely due to cultural issues but stem from the lack of a common standard and evaluation system. Without shared standards, evaluations are inconsistent, and meaningful dialogue becomes impossible.

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

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 to drive strategy implementation.

The essence of these four habit changes is a transformation 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 continuous strategic execution through collaboration.