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The Budget Process Can Cause Managers to Do the Wrong Things - PowerPoint PPT Presentation


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The Budget Process Can Cause Managers to Do the Wrong Things. Expectations of arbitrary cuts cause managers to “pad” budgets. When asked what to cut, managers offer the most defensible items. Fat is hidden. Budget cuts may affect the most useful projects while the hidden “fat” is left intact.

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the budget process can cause managers to do the wrong things
The Budget Process Can Cause Managers to Do the Wrong Things
  • Expectations of arbitrary cuts cause managers to “pad” budgets.
  • When asked what to cut, managers offer the most defensible items. Fat is hidden.
  • Budget cuts may affect the most useful projects while the hidden “fat” is left intact.
the problem with salary budgets
The Problem with Salary Budgets:
  • We want to keep the best people
  • The best people want to get above average raises, so they feel appreciated and work hard.
  • We want everyone to get above average raises.
  • Everybody knows what the raise pool is and know if they got an above- or below-average raise.
  • There is only so much money in the pool.
the result
The Result:
  • Managers keep a loser on staff so someone can get a lousy raise and everybody else can be above average.
  • It’s important to keep a dud around at raise time so we can give above average raises to everybody else.
  • The bottom half makes the top half possible.

For Job Security:

be a loser.