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Given that the budgeting game requires an 'honest' estimate of the department's budget, the budgeting process now becomes very subjective. How can a manager honestly be able to give an honest estimate of her department's budget given that this same budget and the adherence to it will form part of the manager's performance review?
Of course, the manager will overstate the tack added to the honest estimate so he or she will not over budget at the end of the period resulting to his or her performance within acceptable parameters.
In this line, the budgeting game is not an efficient way to budget. This makes this game invalid.Please let me know if you need any clarification. I'm always happy to answer your questions.
thank you. This was the full lenght:
There are two common methods for approaching budgeting at the department level. Using the more sensible approach departmental management carefully determines the funds needed for each of the group’s controllable budget categories and submits as accurate a budget as possible.
The second method, unfortunately utilized a great deal of the time, perhaps even most of the time, requires involvement in “the budgeting game.” In this approach, departmental management calculates an honest budget, and 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. The essence of the “game” lies in being more accurate that the other party in guessing the percentage of padding and thus the percentage of reduction. This sometimes goes back and forth for three or four iterations until the department’s total lands where higher management or finance wants it to be.
Comment on the validity of “the budgeting game,” and describe how you as a supervisor or manager would approach or strategize on how to break out of the “game” and submit an honest, accurate, and acceptable budget.
As a manager who wants to break out from this game, to be able to submit an honest, accurate, and acceptable budget, the 'honest' budget be presented along side the department's budget and actual expenditures for the most recent years such that the difference between the past year and the year being budgeted can be easily identified. In addition, a line by line comparison of the current budget with the past year be done and a commentary/explanation on the difference be presented.
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