Some Managers Are Known for “never Having Missed a Budget Target.” Do You Believe That Is Possible?

Question 3: Some managers are known for “never having missed a budget target.” Do you believe that is possible? Does such a record suggest that the managers are extremely effective managers; very lucky managers, or devious, manipulative managers? Are such managers to be congratulated (and, possibly or likely, promoted in their organizations) for their budget-achievement record?

Whether hitting the budget target generally is a critical measurement of performance for managers. It tests the manager’s ability to generate revenues from the scarce resources and how to allocate the investment in an efficient way. It is possible for a manager to always hit a budget target. In the HCC Industries case, Mike described him as “never having missed a budget target in his 33 years as a manager”. However, simply connecting a hit on budget target with a successful manager is far from fully consideration. This essay will focus on in what circumstances a hit on target does not mean a successful manager, the manipulative strategies that could be used by a manager, how to set an optimal target, and finally how to really value the performance of a manager’s work.

Continuously hitting the budget target which does not truly reflect what the division’s current development stratus cannot be considered as a success for a manager. There are two kinds of situation where a manager could submit an unrealistic and deviated budget target. Firstly, a manager might misunderstand the stratus of the firm’s development and therefore unintentionally plan a deviated budget. As described in the HCC industries Case, the manager Mike has his own philosophy in setting performance target. He loves setting conservative target and makes people feel proud when exceeding a budget. This strategy with strong personal preference probably works in the HCC case and could be deemed as an effective plan. However, what if he insists on his conservative budgeting when he was in start-ups and firms which are in the urgent needs of expanding market shares. A more aggressive target would be more compatible with expanding strategy. A conservative plan might not give enough incentives to the firm’s marketing division, manufacturing division and sales division, and finally though they might hit the conservative budget, the firm lose the chance to occupy the markets.

The second circumstance is that a manager might report a safe figure to the budget committee and the committee could be misled and approved due to the information asymmetry. A budget target is usually determined through four steps, which are issuing guidance from top to down, initialing budget proposal from bottom to up, negotiating between both sides, and approving by budget committee. Through this complicated and bargaining process, reporting a higher cost target or a lower revenue target can enhance the probability of reaching target and getting bonus for the manager’s interests. If that is the case, continuously hitting an unreal target which arises from the gaming from the manager and budget committee is by no means beneficial to the growth of the firm in the long-term. The firm would pay a lot of unnecessary bonus to the employees who reach the very easy target. It drains the revenue from the firm and has no effects in motivating employees. Therefore, it does not make sense to promote the manager in that scenario