In Chapter 5 we reviewed the planning process, gave some guidelines for designing the project plan, and in Chapter 6 we discussed the conflicts arising around the project plan and its implementation. We proposed win-win negotiation and other conflict resolution techniques to deal with these conflicts.
We are now ready to, begin implementation. First priority is, of course, obtaining resources with which to do the work. Senior management approval of the project budget does exactly that. A budget is a plan for allocating resources. Thus, the act of budgeting is the allocation of scarce resources to the various endeavors of an organization. The outcomes of the allocation process often do not satisfy managers of the organization who must live and work under budget constraints. It is, however, precisely the pattern of constraints in a budget that embodies organizational policy. The degree to which the different activities of an organization are fully supported by an allocation of resources is one measure of the importance placed on the outcome of the activity. Most of the senior managers we know try hard to be evenhanded in the budgetary process, funding each planned activity at the “right” level—neither overfunding, which produces waste and encourages slack management, nor underfunding, which inhibits accomplishment and frustrates the committed. (This is not to suggest that subordinate managers necessarily agree with our assessment.)
The budget is not simply one facet of a plan, nor is it merely an expression of organizational policy; it is also a control mechanism. The budget serves as a standard for comparison, a baseline from which to measure the difference between the actual and planned uses of resources. As the manager directs the deployment of resources to accomplish some desired objective, resource usage should be monitored carefully. This allows deviations from planned usage to be checked against the progress of the project, and exception reports can be generated if resource expenditures are not consistent with accomplishments. Indeed, the pattern of deviations (variances) can be examined to see if it is possible, or reasonable, to forecast significant departures from budget. With sufficient warning, it is sometimes possible to implement corrective actions. In any event, such forecasting helps to decrease the number of undesirable surprises for senior management.
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