“A budget tells us what we can’t afford, but it doesn’t keep us from buying it.” – William Feather (found on brainyquote.com)
Ah, budgeting. If only the reality of the future would bend to our will and follow our plans. But obviously it’s not the budget’s fault that things didn’t zero out. Many things can happen to bust a budget, and most of us know what those things are. My thoughts on this subject lean more toward the people behind the budget and the negative activities associated with it.
I’ve seen the budgeting process used in several ways. One is something I call “budget promotion”. In the planning stage, I’ve heard of managers using it as a power play to make their positions seem important by the amount of money they need to spend. In one example, I heard of a manager inflating their budget with a project list that was inflated in the number of projects they intended to start in that year. The manager was trying to get a promotion, and the theory was that their angle was to seem like such a superstar (“Look at all I’m doing!”) that they would be promoted and the actual execution of the huge and expected project list would fall to someone else, and thus be their problem/failure. Turned out, the promotion didn’t come along in time to save the manager from being directly involved in most of the projects not leaving the high level planning stages due to resource limitations (time and manpower). The manager looked like a poor planner at best, and an incompetent egomaniac at worst. No promotion! Do you have a similar story? Have you seen this yourself? Have you been on the receiving end of the inflated project list when someone was promoted via budget promotion?
Another tactic I’ve seen is the “budget as discipline tool”. Say you have a need to capture the way resources are used so they can be compared to the actual spend on that resource (in this example I’ll use parts for fleet cars). You want to see in your fleet inventory work orders which vehicles are using the most parts and are thus candidates for replacement. You require your mechanics to enter any parts used into each work order, but you can’t help but notice that the amount of parts recorded in the work orders is about 15% of what you bought. The ball is being dropped somewhere, and no amount of reminding has helped. Enter the discipline tool: next year’s budget will be based on the amount of parts spend captured on this years work orders. To my knowledge, it didn’t actually work. I think in this case an interim solution could have been used: really explain the purpose of the exercise to those involved, get everyone on board, and have the managers responsible for the work unit review the work orders before they could be closed out, and tie in a reward system to high compliance. Have you had the future of a budget utilized as a discipline tool? (More on reward systems in another post).
Finally, there is one tactic that I think is the most obvious and should be easily detected by now: gamesmanship. Managers set their budget for 10% more than they actually plan to spend, and their bonus is tied to coming 5-10% under budget on a sliding scale. Naturally, they are going to spend what they need and meet the goal, claiming a bonus that may not be much less than the “savings”, and could be more. And they look like a high performer while gaming the system. So, how to detect the gamer? I’d be willing to venture a guess that anyone with something to gain is going to stack the deck in their favor to some extent, but what I’m talking about is the true gamer, the one who is taking you for a ride. Unfortunately, gaming can be hard to detect and harder to prove. So, how do you stop gaming? Remove the budget driven bonus. But if there is nothing to gain, you may not see the “savings”. Maybe that’s ok. Maybe, at the end of the day, it’s better to have a budget met as part of the responsibilities of the job instead of beaten as part of a game (at the least, it’s more honest). Base bonuses and other rewards on something that is harder to game, like employee and customer feedback, along with objective measures like reducing problem resolution time and reducing department turnover. What do you think? Are you a budget gamer?
Obviously, the budget is not going to go away anytime soon (or maybe anytime ever). It will never be a process that is fun for everyone. But I don’t think the word has to have such negative connotations, many of which I didn’t even touch upon here.