Reference no: EM133904634

The Budgeting Game

There are two common methods for approaching budgeting at the department level (think an HIM department). With the more sensible approach, the department manager or director carefully determines the funds needed for each budget category (e.g., supplies) and submits it as accurate a budget as possible.

The second method, and unfortunately one that is utilized too often, is the "budgeting game." In this approach, the manager calculates an honest budget, then tacks on an additional percentage to each budget category on the assumption that higher management or at least the finance department will assume a certain amount of "padding" and arbitrarily reduce each category by some unknown percentage. In other words, the manager believes that higher management will automatically reduce the budget, so they add extra percentage on the front end. The essence of the "game" lies in being more accurate than higher management in guessing the percentage of padding and thus the percentage of reduction. This sometimes goes back and forth for three or four drafts until the department's total lands where higher management or finance wants it to be.

Discussion:

Share your comments on the validity of the "budgeting game." Do you think it is a valid exercise when preparing the budget? How would you as a manager break out of the "game" and submit an honest, accurate and acceptable budget.