Well, it’s that time of year again – budgets and 2016 planning. Great! This process, certainly at my organisation but I’m sure at many others the World over, is met with dread. It can be maddeningly frustrating, stressful and time consuming and is often ultimately unsuccessful.
Recent research has shown that people in financially challenging situations often make bad decisions.
“When they were preoccupied by financially challenging scenarios, the poor did significantly worse. When concerns of scarcity captured the mind, the poor had notably reduced fluid intelligence scores and exhibited diminished executive control.”
Can we apply this research to corporate decision making? I think we can – the stress and complexity created by constraints is quite similar to that which you experience when dealing with personal financial difficulties (although obviously far less important). Indeed, the author actually alludes to the fact that you don’t necessarily need to be ‘poor’ to be affected.
“This also appears to be true for people who are not “abjectly” poor, just budget–constrained. When they were preoccupied by their finances they did less well on the cognitive tests, and the effect was substantial.”
So, perhaps there is a lesson here for the corporate budget process? I think we all know that 12 month, short-term, thinking is unhealthy – but is the mere fact that we are budget constrained very damaging in itself?
Of course, until we find a better approach, this is just yet another nail in the coffin for the current budget process…
WIRED UK article ‘Worrying about money can lower your IQ‘.