A survey of 150 finance executives conducted by the Buttonwood Group and CFO Magazine recently revealed that most companies are failing to fully engage nonfinance users in their performance management processes. Our data is specific to the use of budgeting software, but it's telling. Not only is budgeting a core function within most business performance management (BPM) software suites, but it also sets the foundation for the company's forecasting and variance analysis activities. And few people outside of finance are budgeting efficiently -- or effectively.

Our survey found that line managers have, for the most part, rejected budgeting and planning applications (see exhibit 1), which means finance has to step in and prepare the budgets on their behalf. This creates a lot of extra work for finance. The survey found that it also results in a lot of budget mistakes. For every 100 budgets submitted, close to 40 contain an error or an omission, and even the most sophisticated enterprise planning and budgeting applications do not reduce the frequency of these problems. The only factor that we found to lower the proportion of budgets that contain errors or omissions is having line managers key their own figures into the company's budgeting software system. In the 10 percent of companies where line managers type in their own budget data, 30 percent fewer budgets are submitted with errors and omissions.

The idea that budget data entered by line managers is more accurate may seem counterintuitive. Finance peopleunderstand the mechanics of spreadsheets and budgeting far better than people in operations. But consider that there are two types of budget errors and omissions. The first type is purely mechanical; it includes errors in formulas, data missing because someone forgot to budget for a particular line item, etc. Operational managers are more likely than well-trained finance professionals to make mechanical errors because they have far less expertise in spreadsheets and formula-writing and in the general mechanics of budgeting. However, budgeting errors of the second type -- those that result from misunderstandings, misinterpretations, etc., between the people responsible for spending the money and the people keying in budget data on their behalf -- are eliminated only when line managers enter their own budget data. If finance professionals continue to key in budgets after the company purchases a sophisticated enterprise planning application, the software can't prevent communication errors from making their way into the budget.

The BPM software industry is standing at a crossroads. The adoption rate for BPM software has soared within corporate finance departments. Accountants and finance professionals have eagerly embraced BPM dashboards, analysis, and modeling tools. But performance management applications have failed to win over the rest of the organization, and that failure is costing BPM customers dearly.