Bill Canady warns that adding 5% to last year's budget just scales up old mistakes. Incremental budgeting locks in reactive hiring and ad-hoc decisions instead of building a cost structure from scratch based on strategy.
You're in a conference room with your CFO and 11 functional leaders, and on the screen is your next year's budget. Hey, that's what we do. Who doesn't like 5% growth a year? Last year's cost structure was not designed. It's the sum of every hiring decision made under pressure, every headcount that got backfilled because it had always been there, every function that grew because a customer complained loudly enough in 2019, every process built to handle an exception That nobody has seen since. And you just multiplied it by 1.05% and called it a plan. Last year plus 5% is how you lock in every bad decision you have ever made, plus all those who came before you. Because incremental budgeting is not a finance technique. It's a memory device, and it remembers your mistakes perfectly and your intentions not at all.
