McGrath – Agility via Budgeting

We are going through the list of characteristics that Rita Gunther McGrath lists as critical for firms to be !agile” enough to confront fast changing market conditions. We have already noted that agility here is balanced by stability in terms of values and people.

The first agility characteristic is shape shifting – the ability to morph in a step by step process rather than undergo internal revolution with each and every change that is required.

The second one is central control over the budget. Business units traditionally liked to grow their budgets, but may not be in the best position to see whether that makes sense strategically. Agile firms avoid this pitfall by matching the budget allocations with the strategic thinking – at the center. And, of course, the central managers need to be good at conveying why strategy demands placing resources here or there.

As an aside, Paul Brown makes an interesting point about learning from small steps (rather than big leaps)

As you can see, implicit in the model is that you take small steps because you want to move quickly and you don’t want to waste resources (like time or money.) Wasting money isn’t a problem in and of itself, if you have lots of it. The problem is what it does to your timetable and the efficiency of your actions.


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