Budget – the enemy of the manager?
Jan 10, 2025
The start of the new year brings not only fresh opportunities but also the first confrontations with the reality of approved budgets. Managers now have to deal with what was decided at the end of the year and begin planning how to effectively utilize the allocated resources. From my many years of experience and conversations across companies and management levels, it is evident how the rules and usual practices within companies can start to distort the behavior of managers, as well as teams. I would like to pause on this topic today.
I most often encounter two types of situations.
The first is a manager of a team from the "support function" area (e.g., finance, asset management, HR), whose team does not visibly generate any revenues and is thus dependent on the budget they receive. It is often expected of them to deliver more than they have allocated, because there is no internal company valuation of the activities their team is supposed to provide. And what impact does this have on the budget? Such a manager may be the best "economist", but it affects the team because savings are made on things that others enjoy. Employee events are not often overnight, as they are too expensive, there is not much entertainment because it also costs money, and so instead, work is done to create additional value for the time of people that the team has on an endless list. If they accidentally exceed the budget, they are reprimanded because they are raising overhead costs and thus worsening the company’s results. Therefore, bonuses for others.
This first team looks sideways or rather wholeheartedly envies the second team. Its manager leads "production" or "sales", and large sums of money flow through his profit center. If business is booming, then no one cares if costs drift a bit, after all, he is the one making the profits. And if some money is left, then a clear rule comes into play: "You must spend it or hide it in a drawer!". A publicly traded company wants to present consistent results, not any surprises going up or down. The ability to forecast development is valued, and alongside this, there is the risk that what is not spent today may not be allocated tomorrow, or I will have to laboriously justify it again.
These two situations create tension within companies. The remaining budget needs to be spent relatively quickly, so purchases are made for things that are not entirely necessary, but at the same time, they will make people happy. For example, an expensive team-building event or an opulent Christmas party at the end of the year, or the purchase of phones, computers, a second monitor, office chairs. All of these are visible symbols of injustice, which instead of fostering good cooperation, instill in people’s minds a negative feeling that teams are divided into different unfair categories.
How does a person feel in a meeting when an old laptop takes several dozen seconds to start before their presentation, while a colleague across from them opens a new tablet and draws their ideas directly into the online display with a stylus? What kind of attitude does the colleague, who enjoyed an international trip with the team, bring to the meeting, and now comes from the position of someone who earns to dictate which activities will be done and which will not?
And how much could your company save or gain if the excess budget was saved or allocated more meaningfully and contributed to genuinely needed activities?
If transparent and fair dealings with customers are the main value in your company and you perceive similar situations among your teams, then the best first step is to open this topic during management meetings and gradually eliminate these toxic elements from the behaviors of individual teams and transform them into concrete activities. These might include a joint Christmas party for support and production, a standard for organizing events, rules for office and computer equipment, or tracking the age of equipment. Afterwards, allocate funds to the individual teams accordingly.