Jackson says: “It wouldn’t have felt good putting up a for-sale notice and being gobbled up by one of the big breweries. And if we went private, we’d have struggled to raise finance in the future. That meant we had to grow – and grow quickly.”
But that raised another issue – how to push through the kind of radical change which would enable the firm to hit step-change growth targets.
Bulmer is a traditional company which has been an employment mainstay in a pleasant rural backwater for years. “Bulmer got to the 1950s and liked it so much, it stayed,” says Jackson.
But chief executive Mike Hughes was determined to drag the company into the new century with major cultural change. Jackson felt the traditional budgeting process would hinder this. “We had a powerful obligation to find a process that would drive behaviour that was more supportive of the culture change,” says Jackson.
Two years ago, she suggested that Bulmer should abandon its conventional budgeting process and adopt a new approach in which financial planning is controlled through rolling forecasts and key performance indicators.
Jackson received a wary nod from the board to explore the alternative and initiated a series of workshops involving people right across the company.
“We were gobsmacked by the response,” says Jackson. “We showed them the traditional budgeting process and what it could be like. We didn’t find anybody who supported the current process.” The findings were so damning of the conventional budgeting round that it sent the accountants into open revolt.
“All the accountants said, ‘We don’t give a toss whether we find a new process, we are not doing the old one.’ They said, ‘We work every weekend between January and February to produce a budget and nobody uses it. The only people who think it has got any value are the group executives,'” says Jackson.
The problem was that the conventional budget had created a cottage industry designed to circumvent the figures. One example was the “green book”, a weekly digest of production statistics compiled for the operations director.
“There were two people who did nothing else but fiddle the system,” says Jackson. They sought out problems and put them right before submitting massaged figures for the green book.
It wasn’t that activity was badly managed. It was just that the need to compile a fixed set of figures every week acted as a distraction from the real management priorities. Jackson’s investigations revealed the green book was soaking up Pounds 70,000 of staff time every year to compile.
Jackson has replaced the budgeting system with a financial management process that encourages the sort of management behaviour that will help Bulmer to meet its ambitious growth targets. “The important thing is to make people connect to the drivers of growth,” she says.
Each year, the board sets top-down targets. “We don’t have a choice on those. The targets focus managers on issues such as how much brand investment is needed to meet sales and which customers are the best prospects,” says Jackson.
Because the company monitors performance against this year’s targets as well as last year’s actuals, it can see much more quickly than before whether it’s veering off course. “For example, if our sales target is 10% growth for the year and we’re only achieving 8% in the first two months, we can see we have to do better than 10% in the remainder of the year. So managers are forced to ask key questions,” she says.
Even though Jackson has scrapped the budget, she hasn’t abandoned financial controls. Forecasts are updated quarterly at the financial levels and monthly for customer planning. “We plan our manufacturing now on a rolling 12-week basis,” Jackson says. “At that point in time, we’ve actually agreed promotions with customers.” Instead of working with a fixed annual budget, the manufacturing director now monitors key performance indicators such as cost per hectolitre.
And what about the City? “Analysts couldn’t give a monkey’s about your budget,” says Jackson. “They want to know what your performance is against the previous year. Now we are completely aligned between how we manage the City and our stakeholders and how we manage the business.”
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