24. Budgeting
A target is what we want to happen. A forecast is what we think will happen. Never combine the two in one number, like a budget does. Bjarte Bogsnes1
Cost budgets tend to be spent, even when the initial budget assumptions change (which they almost always do). Managers do not behave like this to cheat; they do it because the system encourages them to do so. Managers see budgets as entitlements, as bags of money handed out at the beginning of the year. Nobody gets fired for spending their budget. Spending too much is, of course, bad, but spending too little is not good either. Bjarte Bogsnes2