Agile People Fika Cast - What are the drawbacks of having overly specific financial objectives

Agile People Fika

Join us on this episode of the Agile People Fika podcast, where we

explore the intriguing subject of 'What are the drawbacks of having

overly specific financial objectives'. This engaging discussion explores

the complexities and potential pitfalls of setting highly specific financial

goals within organizations.

Our conversation opens with reflections on traditional accounting

practices and the resistance to change often encountered in the field of

finance. The panel, including an ex-accountant, discusses how outdated

methods persist in budgeting and management, highlighting the

reluctance to adopt new approaches despite evident inefficiencies.

We then shift to examining human behavior in organizations, particularly

how adding complexity to problems often leads to short-sighted

solutions. This is especially true in finance, where traditional values and

practices are deeply ingrained. The conversation underscores the

challenges of encouraging people to think creatively and adopt new

methods, particularly in areas like budgeting and management.

A significant part of the discussion focuses on the drawbacks of overly

specific financial targets. These rigid objectives can lead to unethical

behaviors, such as gaming the system, and foster a short-term mindset

that undermines long-term organizational health. Specific examples are

cited, illustrating how rigid financial goals can disconnect from the real-

world context of a product or service, leading to counterproductive measures.

The conversation then turns to performance management, especially in

relation to financial objectives. The panelists discuss how managers

often engage in counterproductive actions to meet financial goals linked

to their performance bonuses. This leads to a broader discussion on the

limitations of checklist-driven approaches in finance, where ticking off

tasks can overshadow the holistic impact of actions.

Towards the end of the discussion, the panel introduces the concept of

'beyond budgeting'. This approach involves breaking the link between

annual budgets, fixed performance targets, and rewards, advocating for

a more dynamic and responsive financial planning process. This

method recognizes the need for agility in resource allocation and

decision-making, moving away from the rigid structures of traditional

budgeting.

The podcast wraps up with reflections on the role of HR and finance as

key enablers of organizational agility. The need for these departments to

collaborate more closely is emphasized, suggesting that joint efforts

could be a crucial step in advancing agile practices within organizations.

Overall, this episode of Agile People Fika offers a deep dive into the

challenges and potential solutions for moving beyond traditional

financial objectives, highlighting the importance of agility