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BUDGET GAMES

BUDGET GAMES. Corporate Budgeting: the Ugly Side *. It consumes a huge amount of executives’ time, forcing them into endless rounds of dull meetings and tense negotiations.

maisie-barnett
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BUDGET GAMES

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  1. BUDGET GAMES

  2. Corporate Budgeting: the Ugly Side* • It consumes a huge amount of executives’ time, forcing them into endless rounds of dull meetings and tense negotiations. • It encourages managers to lie and cheat, lowballing targets and inflating results, and it penalizes them for telling the truth. * The Wall Street Journal

  3. Corporate Budgeting: the Ugly Side • It can turn business decisions into elaborate exercises in gaming. • It has the potential to set colleague against colleague, creating distrust and ill will. • It may distort incentives, motivating people to act in ways that run counter to the best interests of the company.

  4. The Sandbagger • Comes to the table with a less ambitious plan: “There is no way we . . . can grow by 10%” • When growth exceeds the target the Sandbagger becomes a hero • Result: Sandbagger is overpaid for performance Adapted from "Games Managers Play at Budget Time"

  5. The Magician • Leaves out negative facts and diverts attention to positive items: “There really are no weak spots in our business right now.” • Result: Inconvenient items that the magician tries to hid will eventually reappear and may have disastrous consequences for the company.

  6. The Lone Agent • Contends that the business cannot conform to corporate conventions because of some unique characteristic: “. . . That principle does not apply to our business.” • Result: Lone agents sow mistrust among peers and superiors.

  7. The Visionary • Managers who do not have numbers on their side often appeal to emotions: “I can’t say exactly when, but this is going to be BIG, really BIG.” • Focus is on long term with little said about the short term • Result: Visionaries should be on solid ground; otherwise the company spends money on projects that often fail.

  8. The Hostage Taker • Some managers claim that they can deliver significant returns if they are given a large proportion of the available funds: “If we don’t invest BIG right now, we’ll be left on the sidelines.” • Result: This can have the potential to damage the company in the future if the Hostage Taker’s plans do not turn out as projected.

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