"Sure, I always ask for more than I need," confessed a manager when describing his budget strategy. "I know they are likely to make some cuts, so I want to leave myself some room to negotiate."
This approach to budget negotiations, while typical, is one of the most ineffective management practices. To ask for more than you need creates distrust. Allocations are more influenced by negotiating ability than by need. Managers inflate demands and hide efficiencies.
Seldom do managers return left-over funds. Instead, they find creative ways of hiding or spending any money that might have been saved.
Budget negotiations could be significantly improved by doing the following:
* Cooperate. Managers should honestly portray their needs and allocators should assume that managers are honest. Cooperation saves time and increases the odds of getting resources to the places that will be most helpful to the organization. Everyone is better off.
* Trust. Managers can improve trust by asking for only what they need. Of course, leadership must respond by taking the requests seriously. Managers who have money left over should give it back.
* Risk. The cooperative-trusting approach to budget requests is risky. I have heard managers exclaim, "I couldn't do that in my organization. My request would still be cut and my department would suffer."
However, most managers have not taken this risk. They merely assume the worst. If managers do not take the risk of honest requests, they will never know how leadership will respond.
* Confront. It is unrealistic to expect all budget allocators to respond appropriately to honest requests.
When leaders treat honest requests with disdain and suspicion, it is critical that managers confront the leadership. The leaders should be informed that their allocations are not adequate.
Assume that you have 10 points to allocate between each of the following pairs of statements. Allocate the points according to the strength of your belief.
During budget negotiations, I tend to:
1. A. Ask for precisely what I think my department needs.
B. Ask for a little more than my department needs.
2. A. Trust the budget allocators.
B. Distrust the budget allocators.
3. A. Operate within my allocations.
B. Overspend my allocations.
4. A. Give back any money that might be left over.
B. Make sure that I do not have money left over.
5. A. Focus on getting on what I need.
B. Focus on getting more than other departments.
6. A. Assume that my requests will be honored.
B. Be surprised when my requests are honored.
7. A. Concentrate on the needs of the total organization.
B. Concentrate only on the needs of my department.
Total the points that you allocated to the A statements. Fift points or more suggests a cooperative budget strategy.