Citibank Indonesia - Budgeting - Mr. Mistri

Citibank Indonesia – HBR Case Study

Executive Summary A budget is not intended to function as a singular mechanism to enable top decision makers to stretch capacity and risk unilaterally to achieve growth and profitability objectives. Looking at/using a budget is a lot like taking a pulse. It is a basic source of information that contains varying levels of reliability and differing resolutions on key aspects of a businesses operations. But it is not the whole story, and should by no means represent a complete set of decision making criteria. With massive multinational organizations like Citibank, information that reaches Corporate Management (“Corporate”) is heavily synthesized and often streamlined. Using this process of “trickling-up” prepared information through layers of middle management and oversight, it can be easy for Corporate to rely too heavily on the limited information provided by the budget in front of them. This leaves their decision exposed to unseen/unconsidered risk factors not available to them in the budget, which might be conveyed by other information deemed “too granular” or “local color” that has been stripped away by the process. As such, careful consideration and priority must be given to “boots-on-the-ground” assessment, context and localized information when making a decision to “stress” the local organization and push for more profitability. This is especially true of global organizations that contain country specific operational scenarios and unique constraints related to the market of operations. While Citibank has provided Mistri with a “sovereign risk limit” control mechanism, it is evident that Corporate is either missing or overlooking some of the localized information and context that caused Mistri, a seasoned manager with decades of local market/industry knowledge -and a history of achieving higher than expected numbers -- to operate under a lower selfimposed sovereign risk limit and a lower than expected (but aggressive from...