The budget process often begins with an invitation from top management for each division to submit a budget request for the coming year. Division heads pass the invitation along to departments, sections, and subsections, each of which presumably collects requests from below, aggregates them, and passes the result back up the organizational ladder.
This sounds like bottom-up budgeting, but there is an important difference be' tween this procedure and a true bottom-up system. Along with the formal invitation for submission of a budget request, in the iterative system another message is passed down—a much less formal message that carries the following kinds of information: the percent by which the wage bill of the organization will be allowed to be increased, organizational policy on adding to the work force, the general attitude toward capital expenditures, knowledge about which projects and activities are considered to be high priority and which are not, and a number of other matters that, in effect, prescribe a set of limits on lower-level managers. As the budget requests are passed back up the organization, they are carefully inspected for conformity to guidelines. If they do not conform, they are "adjusted," often with little or no consultation with the originating units.
The less autocratic the organization (and the less pressured it is by current financial exigencies), the greater the probability that this process will allow dialogue and some compromise between managerial levels. Even the most participative firms, however, will not long tolerate lower-level managers who are not sensitive to messages relating to budget limitations. It makes little difference whether budget policy is passed down the system by means of formal, written policy statements or as a haphazard set of oral comments informally transmitted by some senior managers and practically neglected by others; the PM's budget request is expected to conform to policy. Ignorance of the policy is no excuse. Repeated failure to conform will be rewarded with a ticket to corporate Siberia. It is the budget originator's responsibility to find out about budget policy. Again we see the importance of political sensitivity. The PM's channels of communication must be sensitive enough to receive policy signals even in the event that a noncommunicative superior blocks those signals.
Was this article helpful?
What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.