Sounds like bureaucracy at its finest hour.
This is unjustifiable under any rational Finance/Treasury management.
It certainly surprised me. Bringing a project in significantly under the approved budget was also a negative mark against the project manager who developed the original budget and funding request. The PMs would have to explain in writing why they were so bad at planning the budget for the project.
Gerally what it does is show poor estimate planning on the project managers part, that is money that could have been used eslewhere.
Said another way, coming in under budget is good for the company, but bad for the individual PM. And since that individual PM company employee has control over whether things come in under budget or not, things don’t come in under budget.
AKA the
An eternal feature of human behavior and hence organizational behavior.
TBF, you don’t want your PMs sandbagging their budgets in order to get huge pats on the back for “saving” the company so much. They don’t save the company money, they prevent the company from budgeting money for other purposes.
Said another way, you need to design all your tracking systems and all your incentives so workers cannot game the system to their advantage. But workers have little else to do all day but think up ways to game the system.
Meanwhile, the boss is thinking about how they can game the system that exists at their level while counter-gaming their subordinates’ attempts to game the subordinate-level system. This goes on all the way up and down the chain from CEO to delivery truck driver and everyone in between.
It’s a Og-damned wonder anyone ever gets any actual product out the door with all the gaming going on.
Sounds suspiciously similar to “use up all the budget before year end or Finance will reduce our budget by that much next year.” I heard of one school that replaced all their perfectly good doors one year for this reason.
I see this in companies where they budget money for employee team building activities, such as seasonal parties and seminars. And almost every year in Janurary I see mangers beiing reminded that if they don’t spend that money by April 1st they will risk getting that budget again next year. Then out comes the company shirts and jacket along with a hastely planned outing that most people who show up leave early. While the choosen ones eat and drink at the bar.
My school built a dance studio next to the weight room to use up some State categorical funds one year. Turned out to be a good idea, since restructuring returned the freshmen to campus and PE classes exploded.
And many insurance companies have insurance themselves for very large claims, and it’s called reinsurance.
An example is a company that self-insures their employees’ health insurance, and if they get a claim over a certain amount, they will file with the reinsurer.
I’ve heard that some areas have opened credit unions specifically for legal marijuana vendors.
A small liberal arts college in my area is going to close at the end of the current semester, and that they spent down their endowment was a major reason. They started talking about this a few years ago.
Are you in Illinois, by any chance? I have worked in Illinois, and getting MedicAID to pay is like pulling teeth, and hospitals, nursing homes, etc. lose money on Medicaid (aka Illinois Public Aid) patients anyway, just less money than if the claims were paid.
For example, in 2011 I worked with a woman whose sister was an optometrist in Illinois, and she said that IPA paid NINE DOLLARS for an eye exam, whereas Medicare paid $55 and she barely broke even on that. She did take IPA because she didn’t want local children to have to travel for their vision care.
We could always tell when the Illinois hospital I worked at, which was not part of a big system, was running short on money, because they would crack down on overtime, and at one point, they sent out letters to everyone who had a balance, stating that if it was paid in full by a certain date, it would be reduced by 50%. That was whether it was $100, or $100,000, they’d get a discount.
I assume that meant they were spending in the red for years, causing their endowment “rainy day fund” to shrink, not that they went on a spending spree to be free and clear.