One example I've seen in government/non-business settings is needing to spend all budgeted money in order to avoid budget cuts. It's an incentive to look for problems in order to keep their funding as the solution.
But still, your point stands, despite the specific example no longer being true.
Yet the public doesn't generally consider these firms to be publicly funded organizations, despite taxpayer money being the primary revenue source for many of them.
Incentives drive behavior and it would be wonderful to find incentives to minimize budgets reasonably and to ensure they can be properly increased when justified.
If I run a department in a company that is responsible for say, customer service, there are a million ways I could improve customer service by doing things like increasing efficiency in "back of house" areas and the reallocating those funds to customer facing areas.
Problem is... I can't do that, because if I drive efficiency in the BOH area I don't get to keep the surplus resources I just created, it gets gobbled back up by the organisation at the next budget cycle... So there's literally a NEGATIVE incentive for me to optimise.
Now, I understand why the organisation feels the need to capture that surplus, there might be other areas of the business that leadership thinks needs those resources more. But what they're failing to understand is they're actually hurting both the team making the efficiency AND the team who needs the extra resources because now everything is just going to remain exactly the way it was.
This seems like a ridiculously easy problem to solve though... Just allow teams that drive efficiency dividends to retain say half of the benefit they generate.
The company still gets a chunk of resources back to redistribute the way they see fit, AND the team generating the efficiency are able to implement the rebalancing of resources WITHIN the team that incentives them to make the changes in the first place.
I would bet serious money that the NET divided returned to the central pool would actually be HIGHER even though they only get half of each block of surplus, because you would be providing SO MUCH more incentive to individual teams to find and implement these efficiency gains now.
I think that's a good start but like in the article, could somehow create perverse incentives (for example, if they keep the savings where does it actually go)?
The whole issue of incentives is fascinating to me and I think it would be wonderful to have a "Department of Game Theory" that could model and verify these behavioral assumptions.
Is that really a problem, though? The other half of the savings still gets returned to the rest of the business to allocate as they see fit. Even if the half retained by the money-saving team gets lit on fire, that's still a net positive, overall.
Consider it’s not dumb. Then what is it? Perhaps management knows full well everything you say but they’re also subject to the same incentives.
My hypothesis is the status quo makes the system more predictable all the way to the top, which in turn enables them to confidently pull the levers they want to pull without surprises.
If that hypothesis holds, it seems entirely rational to let support be.
For example, homelessness. There's hundreds of different programs, all trying to "fix" homelessness, using different methods. Ultimately though, they do not make progress - not deliberately, but as an aggregate.
It's like a pill that removes the symptoms, as long as you keep purchasing said pill.
It's why a lot of pharmaceuticals don't cure the root cause, but suppress the symptoms. It's no different in gov't.
A good budgeter will ask for input to determine the next budget. They will treat savings will delight, and not penalise those who created them. They'll find out if the saving is permanently, or temporary. They might ask for suggestions with how the budget might be allocated.
As the org gets bigger and bigger though it becomes impossible to do this on a individual-level basis. So next years budget is formed with incomplete data from this year.
Some savings are because on lack-of-need, some are because not everything happens every year, some are because of incompetence. But the bigger the organisation the less likely this individual variance can be taken into account.
“Ok sure, I’ll eat all the food all the time.”
“If I don’t eat all the food they’re going to feed me less, that isn’t an option”
What exactly do you propose? All companies are micro-utopias? Maybe it drives you crazy because you haven’t tried to see the other point of view. I imagine if you do try, it will make sense, for loose definitions of “sense”.
I’d also like to note that I agree, it is wasteful.