The Annual Budget Process as a Contact Sport

Procurement’s importance shouldn’t be underestimated in budget review

If your company closes its books with the calendar year, there is a good chance the budget review process is quickly approaching. With it come the games departments play – and they are not child’s play by any means. The annual Budget Games are at minimum a contact sport, and at their most extreme a blood sport.

The rules are timeless and well known:

  • The largest budget carries with it the most influence in the organization. We are expensive, so therefore we are valuable.
  • Requests for increases indicate big plans and are intended to communicate vision, while a group that can do the same or more with less lacks ambition and imagination.
  • Perhaps the most dangerous rule for procurement is: if you don’t spend it, you lose it. This unfortunately equates realized savings with a loss of influence, a frustrating indication of how our efforts are often perceived.

Procurement’s role in the process varies greatly from company to company. As cutthroat as the Games can be, there is no such thing as a bystander and each role has its own advantages and liabilities.

Procurement as Competitor

The most influential procurement organizations play an active role in the Budget Games. The C-suite in these companies expects procurement to review each budget to make sure that savings realized during the year are reflected in appropriate adjustments for the next year. While this scenario reflects the greatest possible clout for procurement, it is also the most likely to lead to ‘injury’ from contact. The more aggressive procurement is in the Games, the harder they will have to work to forge and maintain relationships with budget holders to accomplish projects during the year.

Procurement as Referee

Depending on how proposed budgets are presented and reviewed, procurement may be present to take an active role in asking questions or stopping the conversation when a budget holder goes out of bounds. Procurement has to be able to think quickly to be successful in this role, serving as an auditor on-the-fly. Beware of how many times you stop play, however, as no one – and I mean no one – ever cheers the refs for stopping the game.

Procurement as Spectator

When procurement is viewed as a subset of finance, or when they are early in their transformation from purchasing to a more strategic team, the best that may be hoped is to secure a ticket to watch budget presentations. While having procurement sit on the sidelines indicates a relatively low level of influence, it also brings with it significant upside and little risk of injury. Much like a poor season leads to an early first round draft pick, this procurement team has nothing to lose. They can note who should be sought out for collaboration, which projects are ripe for sourcing, and even flag budget holders that do poorly with the executive team. Those departments are more likely to be receptive to a friendly offer of help.

The most important thing for procurement during the Budget Games, is to understand which role you will play and be prepared to make the most of it. After all, it will be a whole year before the Games begin again.

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