Henkel Reengineers Budgeting Process; Cuts Annual Budgeting Cycle Time By Half, Cost By Nearly 40%

Research by The Hackett Group finds that most organizations could reap substantial cost and value benefits from improving their annual budgeting process. For the typical company, budget creation requires more than 100 working days, four iterations and, according to a 2005 Europe-focused Hackett study, costs between 300,000 and 450,000 euros per billion of revenue. The budget itself typically encompasses 180 line items. Through a 2003 Hackett finance benchmark, Henkel KGaA -- a global conglomerate of some 240 affiliated companies -- found that its budgeting process closely matched the profile of the typical company in the benchmark. This Hackett Insight describes the change program deployed by the organization to transform its annual planning process. Benefits achieved include cutting the annual budget cycle time by about 50%; planning costs have fallen from about 4.75 million euros in 2003 to an estimated 2.9 million euros for 2005, with the required staffing requirement falling from 89 to 55. This case study is based on a presentation given by Dr. Matthias Schmidt, Henkel's vice-president of corporate planning/strategic controlling, at The Hackett Group's 2005 European Best Practices Conference.