4 ms·

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 pr

by causal 3y ago

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.

pstuart 3y ago
In some cases it doesn't even require creating "problems", the budget just needs to be spent to justify keeping it for the next round. I believe the military excels at this practice. 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.
- llamaLord 3y ago
  This is one of those things that seems amazingly dumb to me in business and in government. 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.
  - pstuart 3y ago
    > Just allow teams that drive efficiency dividends to retain say half of the benefit they generate. 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.
    - kelnos 3y ago
      > 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)? 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.
  - MrDarcy 3y ago
    > now everything is just going to remain exactly the way it was. 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.
  - michaelmrose 3y ago
    You are right. Not only do you lose the resources you saved but you are now less resilient against changeable circumstances as you approach a natural maximum efficiency based on resources and circumstances. A fat inefficient department can pluck low hanging fruit at need a lean efficient one may fail under pressure even if more resources are provided late in the game because it may not be able to efficiently turn money into productivity without a significant ramp up in terms of recruiting and training.
meeech 3y ago
This 100% happens in businesses. Not just gov/non-business.
- HKH2 3y ago
  We don't/shouldn't have to pay businesses though.
  - eyelidlessness 3y ago
    We certainly do have to, at least for certain values of “we”. An example in the US is the current legal obligation to procure private health insurance. (There are exceptions to this obligation, generally lack of means, and in turn may qualify one to procure private insurance with tax subsidies.)
    - freddie_mercury 3y ago
      There hasn't been a legal obligation to have private health insurance since the Tax Cuts and Jobs Act of 2017, which was 7 years ago. But still, your point stands, despite the specific example no longer being true.
      - dataflow 3y ago
        There are still some states that require health insurance.
      - eyelidlessness 3y ago
        I had to refresh my memory, so I looked it up. What I see now is that the mandate is technically still law, but the tax penalty was eliminated. Not that it’s a meaningful distinction, just an odd legal artifact.
  - xav0989 3y ago
    Some things like car insurance are a legally mandated purchase from a private business.
  - 3y ago
725686 3y ago
This has always driven me crazy. Its just amazing how much $$$ is wasted because of this.
- dgfitz 3y ago
  “I promise to feed you as long as you eat all of it.” “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.
campbel 3y ago
Seems like an issue with how budgeting is managed. Its always important to find the correct incentive structures.
- chii 3y ago
  no such corrective structure can exist, since the organization will cease to exist if the problem is fixed for eternity. 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.
  - campbel 3y ago
    If the organization is solving the problem, removing the organization would result in the problem returning though, right?
    - chii 3y ago
      that's not solving the problem is it? 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.
rtkwe 3y ago
That's not a department maintaining the problem they were designed to address though unless it's a watchdog on government waste.
bruce511 3y ago
It's a predictable outcome though. Budgets, by implication, imply that resources are limited. Someone, somewhere is deciding winners and losers. 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.
beached_whale 3y ago
At least some governments have put in controls to stop end of year spending at least. Only part of the issue though. Centralization of common services has aided in this too.

by causal 3y ago

pstuart 3y ago

In some cases it doesn't even require creating "problems", the budget just needs to be spent to justify keeping it for the next round. I believe the military excels at this practice. 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.

llamaLord 3y ago
This is one of those things that seems amazingly dumb to me in business and in government. 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.
- pstuart 3y ago
  > Just allow teams that drive efficiency dividends to retain say half of the benefit they generate. 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.
  - kelnos 3y ago
    > 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)? 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.
- MrDarcy 3y ago
  > now everything is just going to remain exactly the way it was. 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.
- michaelmrose 3y ago
  You are right. Not only do you lose the resources you saved but you are now less resilient against changeable circumstances as you approach a natural maximum efficiency based on resources and circumstances. A fat inefficient department can pluck low hanging fruit at need a lean efficient one may fail under pressure even if more resources are provided late in the game because it may not be able to efficiently turn money into productivity without a significant ramp up in terms of recruiting and training.

meeech 3y ago

This 100% happens in businesses. Not just gov/non-business.

HKH2 3y ago
We don't/shouldn't have to pay businesses though.
- eyelidlessness 3y ago
  We certainly do have to, at least for certain values of “we”. An example in the US is the current legal obligation to procure private health insurance. (There are exceptions to this obligation, generally lack of means, and in turn may qualify one to procure private insurance with tax subsidies.)
  - freddie_mercury 3y ago
    There hasn't been a legal obligation to have private health insurance since the Tax Cuts and Jobs Act of 2017, which was 7 years ago. But still, your point stands, despite the specific example no longer being true.
    - dataflow 3y ago
      There are still some states that require health insurance.
    - eyelidlessness 3y ago
      I had to refresh my memory, so I looked it up. What I see now is that the mandate is technically still law, but the tax penalty was eliminated. Not that it’s a meaningful distinction, just an odd legal artifact.
- xav0989 3y ago
  Some things like car insurance are a legally mandated purchase from a private business.
- 3y ago

725686 3y ago

This has always driven me crazy. Its just amazing how much $$$ is wasted because of this.

dgfitz 3y ago
“I promise to feed you as long as you eat all of it.” “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.

campbel 3y ago

Seems like an issue with how budgeting is managed. Its always important to find the correct incentive structures.

chii 3y ago
no such corrective structure can exist, since the organization will cease to exist if the problem is fixed for eternity. 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.
- campbel 3y ago
  If the organization is solving the problem, removing the organization would result in the problem returning though, right?
  - chii 3y ago
    that's not solving the problem is it? 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.

rtkwe 3y ago

That's not a department maintaining the problem they were designed to address though unless it's a watchdog on government waste.

bruce511 3y ago

It's a predictable outcome though. Budgets, by implication, imply that resources are limited. Someone, somewhere is deciding winners and losers. 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.

beached_whale 3y ago

At least some governments have put in controls to stop end of year spending at least. Only part of the issue though. Centralization of common services has aided in this too.