The Budget Cycle

Fair Warning: This is not for novices and beginners. You need to have gone through several “…101” courses (Evasion 101, Misleading 101 and Cover-Up 101 to name a few) to be admitted to this Game of Budgets.

Every organization believes that if every department and every area of business is tied to a strict budget, things will automatically be under control. The corporate mantra for governance is ‘budget versus actual’. It is therefore no surprise that seeking and getting sumptuous budgets approved feels like a real life enactment of Hunger Games.

Though the budgetary cycle is only an annual affair (incidentally, ensuring job security for hundreds of spreadsheet-wielding finance wizards and their deputies), if you are responsible for running anything at all in your company, you do not rest for one minute from thinking about past/future budgets. The cornerstone of your planning should always be more ‘projects’ on your list than anyone or any organization can dream of completing in centuries. For example, if you are a Facilities Manager, you need to have an endless array of ‘to-do’ items such as ‘repaint the underside of shelves in the records room’, ‘enlarge the company logo displayed all over the office’, ‘increase the number of water fountains in the cafeteria’ and ‘change the ringtone on all phones in the office’. Moreover, to ensure that you get noticed at the right time by the right people, you also should have a sprinkling of projects such as, ‘change the color of the one-month old carpet in the CEO’s office’ and ‘replace the coffee maker in the Board room twice a month’.

A golden rule in budgetary exercises is to be aware of past ‘performance’. As a departmental head, you never want to be in a situation of having underspent or underutilized the previous year’s budget. This is like signing your own death warrant by inviting a lower budget for the coming year. Therefore, you keep a very close eye on what you are (not) spending throughout the year, especially accelerating your spend, if needed, towards the end.

A common topic, which is inevitably linked to monetary budgets, is the issue of headcount. Managers fighting for an increase (or against reduction, during desperate times), is a familiar scene in all organizations. The savvy manager stays ahead of the pack by using colorful presentations of the innumerable tasks (refer earlier description of ‘list of projects’) that her team has to take care of. For good effect, the resources are divided and subdivided into minute ‘buckets’ to project an image of insufficient staffing for every task. For example, the above-mentioned Facilities Manager would classify her mail-room staff into those responsible for sorting Fedex packets; sorting UPS packages arriving in the afternoon; delivering confidential, priority mail to ‘C’ level executives; and so on. Divide and Conquer of sorts, I suppose.

The grand finale of any budget exercise is the meeting of the apex committee for final approval. Needless to say, several sub-committees would already have done their work and filtered out the less fortunate departments’ requests. Interestingly, significant budget allocations are in order for these sub-committees themselves. Many a time, these committees are master show pieces to demonstrate company wide ‘participation’ while all the shots are, by default, called by the ‘Chief of Staff’, who has the ear of the CEO and others on the top floor.

In line with all corporate meetings, the apex committee uses a randomization algorithm to cut or approve various budget requests – such randomization ensures an atmosphere of luck and chance, rather than one of need and purpose. And then, everyone moves on to preparations for the next cycle, providing an opportunity for the losers to have one more try.

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