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“Yes, I have been looking at this new shrink wrap machine for next year. It picks up a pallet, automatically spins it and shrink wraps it, all in about 20 seconds. It’s pretty cool. It’s on my list of things to buy for next year,” Corina proudly stated.
“Great! But is that where we need to spend the money?” I asked.
“Well, I usually always get to spend what I spent last year. In fact, if I don’t spend it, I will lose my budget the following year and will have to do a song and dance to spend anything.”
“But is that where we need to spend the money?” I repeated.
Corina looked down at her feet, then back up. “I really don’t know. Every year, I go out to the equipment show in Las Vegas and look around. I have a pretty good eye for deals on equipment and I have to justify the trip.”
“But is that where we need to spend the money? Where, in your system, should we focus our attention? Remember, as a manager, your role is to create, monitor and adjust the systems in your area. I really don’t care about neat robotic equipment. I care more about impact on the system.” -TF
Sorry to go a bit off-topic, but one part of this story hit close to home with me:
“Well, I usually always get to spend what I spent last year. In fact, if I don’t spend it, I will lose my budget the following year…â€
Throughout my career I have worked in several departments in the federal government and in my opinion, this rule alone accounts for about 90% of the wasteful spending.
Managers are tightfisted with their budgets all year long, until about a month before the fiscal year end, then they scurry around looking for -ANYTHING- to spend money on. It doesn’t matter if they need it. It doesn’t even matter if it’s useful.
Now, I’m not blaming the managers themselves. This problem seems to be ingrained into the culture of my organization.
It sounds to me like a complete lack of forecasting or forethought. They hang onto their budget because the future is unknown and scary, then the “spend-it-or-lose-it” deadline arrives.
Tom, any thoughts / solutions? Is there a better way for the people at the top of a large organization to budget than simply giving the same groups within the same amount of money as the year before? (There has to be!) 🙂