By Lance Glasser, Guest Author
As budget season approaches the Company must decide which of its strategic concepts will be crystallized into real strategies by allocating to them our scarce resources. While the goal is to maximize shareholder value, the need for crisp decisions inevitably leads to budget games as old as the oldest profession. Each Spring, as the world emerges from the repose of Winter, a general manager’s mind turns to budgets and bonus targets. Having survived such games without number, including seven years with the Federal Government in Washington, D.C., I thought I would help you with a primer on budget tricks.
First, you need to start with a good environmental analysis. For instance, our customers are getting smarter about how they buy and competition is increasing. Our market share is at dire risk. As any book on negotiation teaches, people respond more strongly to the threat of bad things happening than to the potential reward of something good happening. Obviously then, you need to focus on the approaching Armageddon. You need more money just to protect your franchise. The potential benefits of growth are a lower priority than all the bad things that might happen.
After you have created the right climate of fear, the following techniques have all been used at various times to great effect:
1. Create a sacrificial project. Everyone knows that executives feel good if they get to cut something so make sure you give them something to cut. It pays to make it obvious so that the execs don’t make a mistake and cut the wrong thing.
2. Keep around extra people and projects as downsizing fodder so that when the inevitable cuts come, you have something relatively painless to give up.
3. This next technique is called the “Washington Monument.” When the US legislature wants to prove that they have made every possible cut, they close the Washington monument because they have “run out of money.” There just isn’t another 0.0000001% anywhere. Local governments close the town library.
4. Claim, that because of a 5% budget cut, the project will get delayed by 20%. This is done by either pointing out that most of the costs are “fixed” and therefore the only thing left to cut has a big impact. The other way to do this is to have multiple projects and allocate the entire cut to the lowest priority, as one should. Thus a 5% overall cut impacts the project that has only 15% of the budget by 33%.
5. Another one of the classic techniques goes by the name of the “gold watch.” This technique is to rank your projects and draw a proposed cut line where the project just below the cut line is the boss’ favorite project. The goal is to get the cut line moved down one project.
8. By funding this new project for $100,000 you will save millions, later. This goes by the name, “I will gladly pay you Tuesday for a hamburger today.” (Thank you, Wimpy)
11. Jujitsu: this superb technique involves getting the boss to think that he or she came up with the project idea themselves. Consistency is an important part of this. You need to convince the boss that not approving this would be inconsistent with what they said last time. It is the boss’ fault. Indeed, shifting blame back to the boss must be considered the most time-honored of techniques since it dates back to the first conversation Adam had with God in Chapter 3 of Genesis, where Adam says, “The woman whom You gave to be with me—she gave me of the tree and I ate.”
I hope that this was helpful to you. A more complete list is given in the original article.
P.S. Figuring out how to cut spending and profitably grow the company is a refreshing alternative if you want to avoid the crowds!