How to Create Fear Through Your Headcount Budgeting Process…

It's going to be budgeting time for a lot of you soon.  The time of year that brings hope.  The time of year that lets you think about what's possible.

The time of year for sandbagging.

Any time I think of the budgeting process, I always think of the headcount game that goes on between departments of all kinds and finance.  You ask for 5 additional headcount so you can get 2.  You know the drill all too well.

As it turns out, if you're engaged in meaningful conversations about expanding your presence in any market through expanded headcount, the budgeting game I've described above can also cause people to freak out a bit, especially if an inexperienced leader goes back to his team with the expanded headcount he/she is going to present in the budgeting process, only to see it hacked to 20% of what was originally submitted.

More from Ben Horowitz:

"Another subtle problem with this process is that when I asked my team what they needed to achieve their goals, they naturally assumed they would get it. As a result, my team deeply socialized their ideas and newly found money with their teams. This has the added gaming benefit of inextricably tying their demands to company morale. When the VP of marketing asked me for 10 headcount and $5M in program expenses, then shared that plan with his team, it changed the conversation.

Now a major cutback to his plan would alarm his team because they had just spent two weeks planning for a much more positive scenario. “Wow, Ben greatly reduced the plan. Should I be looking for a job?” This kind of dynamic put pressure on me to create a more expansive expense plan than was wise. Multiply this by all my managers and I was on my way to burning up all my cash and destroying my culture." 

Just another example of job #1 for any leader - Control The Message.  You think your senior leaders with budget responsibility would know enough not to socialize a big headcount request to a broad team.  You'd be wrong.  They socialize it for one of three reasons:

1. Because they need the team to do a lot of the work involved.

2. They truly want to engage their teams and think this process provides a great opportunity to do that.

3. They're sneaky bastards.  They using the process to become martyrs to their teams.  Soundgarden explained this in their underground hit "Jesus Christ Pose".

Don't assume the people leading departments can mitigate damage caused by your headcount budgeting process.  If you want to prevent people from assuming the martyr pose, you'll have to be very specific related to how information is shared.

You call it control freak.  I call it smart.

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