An Agile Tale – The Family Budget

It was November and the Hills were fighting over the family budget.

They were meticulous planners, so would sit down every January 31st to allocate the budget for the year. However, being meticulous planners they would also sit down at the end of November to review any changes they needed to make to their spending to help get them to January 31st in “good shape”.

Now it’s probably not a surprise to you that there was some tension when discussing budgets, but I very much doubt you fight over the same things that the Hill’s do every November.

“Steve you have not spent nearly enough on electronics this year, I thought you were supposed to like gadgets, why are you not buying enough of them, come on Steve you need to keep up”. That’s Marian Hill speaking, she cannot believe how her husband is letting the side down.

“You can buy electronics too Marian, you are the one who plays the Playstation, at least buy some games occasionally.”

This bizarre conversation is driven by an even more bizarre rule that the Hill’s apply to their budgets, they call it “Use it or lose it”.

Many years ago, the Hill’s split their budget into various categories and then allocated an annual amount they would be allowed to spend within each category. What they should then have done at the end of each year was:

  • Review how much they had under/ over-spent in any particular category
  • Look at the reasons that under/over-spend occurred
  • Use the data generated to forecast into the next year what costs we might have within those categories
  • Finally allocate a new amount per category

Instead, under “Use it or lose it” if there is any money left unspent on January 31st in any of the categories, then that amount is deducted from the next years allocation, resulting in a smaller allocation of funds in that category.

This drives a negative behavior in the Hill’s as they fear operating on a smaller budget in the coming year, so they always feel they have to spend the year’s entire budget allocation, even if they don’t need to, in order to allocate themselves the same level of funds for the next year.

“Its agreed then, we will lease out a 3rd car which we will use as the “weekend car.” Says Steve relieved that they won’t have to reduce next year’s motoring budget.

“What shall we do about the money we allocated for the maintenance budget? nothing broke this year, so we still have all of the money left, a whole year’s worth of money which can only be spent on maintenance”. Says Marian.

Yes, it gets more bizarre, the second part of their budgeting rule is that once allocated to a category, the money can only be spent on that thing, money could not be transferred between categories, not without some serious inventiveness.

“What if we buy a 5 year maintenance contract for everything, that will use up all of the money we allocated this year…oh, but then what do we do with the maintenance money we want to allocate in January, or for the next 5 years, we will lose all of the money.” They are working hard to make the numbers work, even though this definition of “make the numbers work” is an altogether different definition to what is really in the Hill’s own best interest.

“Maybe we can stretch the definition of maintenance to include the maintenance of “Us”. Then we can get our teeth whitened, and maybe you can get that laser eye surgery that you were thinking about Steve” beams Marian. This manipulation of budgets is possibly the most innovative “ideas” session that has happened here all year.

The panic and fear stage has passed and the Hill’s are now working as a team to make sure the budget is all spent by the end of January so they can do some “proper” budgeting come January 31st.

Knowing what we have learned about modern methods of running profitable businesses, you may think what I have described is a retro story showing a by-gone time. Unfortunately this way of budgeting is still alive and well. If not at an organizational level, it will be probably happening at a department level, somewhere near you.

The underlying problem I believe is too much bureaucracy, a lack of trust and posturing by management.

If departments give back money to the central fund for having under-spent, but then later find that some unforeseen circumstance occurred and they now need funds that they do not have, the amount of time they would need to work through the bureaucracy of funding allocation could cripple them. Then there is the lack of trust in the organization itself to give the funds back to them should they require it. It is I suppose a lack of faith that the top levels of the organization even understand their pain, and as such would not act in time to support them, or might not even act at all.

That covers bureaucracy and lack of trust; but posturing by management is a whole other issue. Simply put, it is an extension of the old playground argument of whose dad is bigger than whose, which then evolves into the adolescent argument of whose appendage is larger than whose, through other variants such as whose car is faster than whose until we get to whose budget is larger than whose. It is a self-destructive, multi-level game which penetrates work culture, perception of self-worth and social status outside of work.

It’s a bizarre way to allocate money in the organization, and it drives good people to adopt negative behaviors in order to “protect” themselves and their department, to the detriment of the organizational whole.

“People are moved by two levers only, fear and self-interest” Napoleon Bonaparte

How can YOU summon up the courage and strength to “do the right thing” when you believe that everyone else is not?

Gaining knowledge is the first step to wisdom, sharing it is the first step to humanity” Unknown

My Request: My belief, is that you knowing what I have shared with you here (and all messages written under the “Punk Agile” banner) will result in better transformations and increased happiness. If you found this helpful, I would be grateful if you could Share this posting via Linked In, so that the message can spread further, beyond my network and into the lives of others who could benefit from hearing this too – Thank you for sharing the knowledge

1 thought on “An Agile Tale – The Family Budget”

  1. Hi, thank you for this post I agree with you that Knowing what we have learned about modern methods of running profitable businesses, you may think what I have described is a retro story showing a by-gone time. very useful information.

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