Your Budget is a Translator – Not a Translation: A Rosetta Stone Approach to Budgets Can Make Strategic Thinking Easier

I love aha moments. As a learner and teacher, it is like a Fourth of July fireworks extravaganza in my head when suddenly an idea crystallizes, and things fall into place – sense-making at its best. After teaching financial leadership for a decade with a headstrong desire to find more ways to make people more confident, competent, and comfortable with the financial side of organizations, I recently had an aha present itself to me about organizational budgets and how we engage with them.

(I know some out there will be aghast that it took 10 years)

First, some context
Few things create anxiety and stress as much as budgets. In my early years, budgets happened to me and I knew little about where the numbers came from. Later, as a senior director, I was expected to build budgets and come up with revenue and expense predictions to impose on myself and others. Even later, I was presented with budgets and asked to approve and monitor progress as a board member.

Rarely, did I feel confident and comfortable. Something was always missing in my understanding about what was behind the numbers and reports. Balancing the numbers to ensure financial viability or talking about what fundraising strategy would make an organization “sustainable” didn’t sit right. I always felt like something was being lost as "sustainability" seemed narrowly conceived of as simply financially viable over time. Something was just out of my breadth of knowledge about the organization – something was being lost in the financial translation.


Now, the Aha
What happens when we view our budgets as Rosetta Stones and we expect of them all that a Rosetta Stone makes possible?

The amazing thing about the Rosetta Stone was not that it presented a translation of something. It was that it created an understanding of how different languages connected to each other. It allowed us to understand how an idea in one realm (Hieroglyphs) translated and showed up in another (Ancient Egyptian). By doing this, it provided us with a bridge to travel back and forth between languages.

The key is that the Rosetta Stone is not a translation – it is the translator. We don’t take a story written in hieroglyphs and simply ask if the symbols show up as they do on the Rosetta Stone, with or without any variance – and then freak out if they don’t match. Rather, we look through the Rosetta Stone to match the hieroglyphs with the language we know, helping us understand the original story that was being told.

This is the powerful outcome of a Rosetta Stone - the ability to navigate back and forth between two realms. This is the outcome we could come to expect of our budgets.

In our organizational world (since it’s a bit more relevant than the Ptolemaic world of ancient Egypt), the languages we are concerned about bridging are (a)the execution of strategies that lead to community benefit AND (b)the transactional method of accounting for the assets associated with doing that work. In this model, the budget is not a translation of our program work into numbers, but rather the tool that bridges the financial asset transactions (money in and money out) to the execution of our strategies (for program delivery, infrastructure, and asset engagement).

REPEAT: The budget is not a translation of the program execution into financial numbers. It is a translator between the program execution and the financial assets.

The challenge is that our traditional way of presenting budgets as compressed numerical spreadsheets is like trying to translate only using consonants. We get a gist of what is meant, but don’t fully understand the original message. We are missing the vowels – the assumptions, the procedures, and schedules – that give understandable meaning to the consonants.

The breakdown continues as we get “financial” reports that also have no vowels. We then get stuck comparing consonants without the context of the bigger message the budget actually attempted to translate – the one with all those vowels in it. (Are you feeling lost yet, because that is what it’s like trying to connect our financial report to actual program implementation and efficacy).

The Implication
What would it take to make our budgets better translators? What would a budget look like that serves as a lens to look through – a lens that allows us to bridge financial reports back to program implementation? 

It’s a budget with both consonants and vowels.

Unlike the actual Rosetta Stone that is missing critical pieces, our budget Rosetta Stones can be complete. They can be quantitative AND qualitative. We simply have to choose to build them that way.

The first qualitative element is to structure the budget around programmatic efforts. In short, that spreadsheet should have multiple columns – one for each distinct programmatic effort you engage in.

This helps those using the budget better understand which efforts generate revenue and where financial assets are being invested. It clarifies “where” the resources come from and go relative to the programs the organization carries out. Also, when we fully load each program column with the core support functions of the organization (aka “general and administrative costs”), readers fully understand what it takes to deliver program outcomes and can conceptually “see” that those core functions ARE investments in program delivery.

Now for those rows. This is the “what.” They show functional elements of the budget, meaning the types of things you invest in and/or pay for. These should not be limited to the name of the “account” that is set up in the accounting system. Remember, we are translating here. Those row labels should reflect the language staff and board use to describe the infrastructure and systems the organization relies on and pays for (and yes, different staff may need different levels of breakdowns within each of these rows).

These two steps go a long way to build qualitative understanding of what the numbers actually represent. It ties the money to programs and structure (in this case, people are part of your structure).

Now what about the “how” or “what it takes” part of the work. This is what is most often lost in traditional budget documents. When we only present financial assets, we lose all the strategies, assumptions, dependencies, and timelines that actually drive the work we do. Our overall theory of change and strategy of implementation (what we are actually all about) gets stripped away. These are all the vowels that actually give context and meaning to the numbers.  If the budget is going to serve as a translator, it needs this vocabulary too.

Consider the key assumptions that led to the numbers being proposed in the budget. Which of those are critical for a reader to know in order to make an informed judgement about what they will see on future financial reports. This strategic understanding should be presented as part of the budget in narrative form. Key assumptions and dependencies should, whenever possible, tie back directly to each program effort they are relevant to. 

This ensures that anyone responsible for agreeing to and/or approving a budget, clearly understands what we, as an organization, believe it will take to make the budget projection (really our best guess) a reality over the next 12-18 months.

This creates a powerful inquiry tool for all fiduciaries in the organization. Bolstered with a budget Rosetta Stone like what is described above we could imagine the following set of questions:

1. How are we doing at achieving our intended outcomes for people in the community (always the first question!)
   
   
2. I see our budget assumptions indicated that x,y, and z would need to happen and/or be in place. Did that play out as expected? Is there a variance in the execution that should be noted? Is there anything important about what happened that would alter our original assumptions about what it takes?
   
   
3. The budget shows that these financial transactions should have happened (revenue earned, expenses paid, reserves built, etc) as a result of doing x,y, and z. Did the financial transactions follow those assumptions as expected? Is there a variance? Is there anything important about what happened financially that would alter our original assumptions about what it takes to earn/spend as projected?
   
   
4. What assumption need to be revised? What actions do we need to take?

Seems like a productive and highly strategic line of inquiry. And yes, a well developed Rosetta Stone budget makes that conversation accessible and realistic.


P.S. - Um, yes, this requires transparency about those assumptions and being transparent takes effort and time!