There’s not a day that goes by without some discussion of budgets, especially this time of year. This is certainly the case with the senior-level discussions I have, where the conversation ultimately ends up on the subject of budgets.

Don’t get me wrong, it’s not all we talk about – there’s plenty of discussion about ROI, market share and the latest strategies and tactics for unified marketing, but the conversation always ends with some discussion of budgets. Maybe that’s the problem?

I’m not talking about the frozen budget problem or the not-enough-budget problem, there’s no solution for that. Rather, I think the problem with budgets today is how they’re split up. Budget allocation is the problem.

Take for example the CMO (names withheld to protect the innocent) who has a traditionally organized budgets like this:

• 70% working media
• 15% trade media
• 15% production/PR/fees

If this client wants to leverage social networks to engage with consumers, the allocation is actually a little more like this:

• 5% working media
• 80% production/PR/fees
• 15% additional staffing requirements

The budget isn’t organized this way today, and the CFO’s office and procurement aren’t being flexible. I find this situation happening pretty regularly. It isn't that the CFO's office isn't part of the business discussion and that they don't want to see the organization succeed, but the system is set up one way and in many ways, it is dated from a previous time and period of advertising.

Most CFOs and procurement offices have a procedure for modifying budget categories and moving stuff around, unfortunately they allow for easy movement on the edges and make it much harder at the core. The real problem is that it might take 60-90 days to make the shift. In that amount of time, an agile challenger or a progressive market leader is already having a dialogue with the community and the space is crowded and noisy.
 
The Headcount Line Item
The biggest problem however is that the real budget change the marketing department needs is head-count. Adding people is the hardest thing to do in today's climate as the capital markets, equity markets and global environment is volatile to say the least.  However, consumer engagement is a person-to-person event - it requires people.

Agencies are adapting and adding solutions to help CMOs outsource community management, social monitoring and engagement and even helping to route contact into call centers as need be, but marketing organizations need a few more people to make a really big difference.
 
Shift to ROI-Based Budget Allocation
What I suggest is moving budgets into a ROI based allocation that the CMO is accountable for and that the CFO requires reporting and monitoring, but not strict category adherence.  The pace in which we operate is too fast to use conventional means of fiscal control and the need to grow market share is too great to allow a GL to impact our performance negatively.  

What do you think? How should budgeting change to reflect the realities of unified marketing?