The Enemy of Good Management

A new book has it right: We need to change the way we budget.
by | October 2, 2013 AT 12:00 AM

Nearly every discussion of public budgeting is really about policy and politics. There is drama in deciding what should be done by government and in getting those decisions adopted through the political process. But these machinations mean little if we can’t figure out how to implement policy decisions efficiently and effectively.

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The University of Kansas has one of the top city management training programs in the country, and for several years I taught its public finance class. The students were smart and committed, but the only reason they took my class was that it was required—they saw it as drudgery to be gotten out of the way so they could go on to the important stuff. I made it my mission to show them that they could not manage an organization well if they did not understand its finances.

These ideas are the central premise of a recently published book, The Human Side of Budgeting: Budget Games and How to End Them. Its author, Scott Lazenby, a longtime city manager well known for his work in the wider field of public administration, argues that traditional governmental budgeting systems work against everything we know about good management. He provides a road map for how to link management and budgeting in a way that allows governments to meet today’s challenges with a minimum of drama.

Throughout the book, Lazenby uses the concepts of “Theory X” and “Theory Y.” Students of management will recognize these. Theory X, built around the industrial efficiency ideas of Frederick Taylor from the 1900s, has command and control as its central premise. In this view, workers must be directed to perform in the “one best way” because they’re motivated only by money and will do as little as possible.

By the 1960s, these concepts had been discredited and replaced by Theory Y: The idea that employees like having control over their work and see a job well done as a reward in itself. But despite everything we’ve learned about human behavior in the last 50 years, Theory X still is woven through our organizations. “Most governments—and large private bureaucracies, for that matter—are governed by rules and systems that assume employees are lazy and stupid,” Lazenby writes.

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Jumping onto the latest trendy management philosophy or style, in Lazenby’s view, “won’t make any difference in an organization with the same old plumbing.” He argues against nearly every aspect of the traditional budget process. In his system, for example, budget control would be distributed to the lowest possible level within line departments, such as police and public works, empowering unit managers to work toward a bottom-line target.

Managers who take on the challenge of developing this kind of budgeting approach must have courage. When a serious mistake occurs or a scandal erupts, a claim that it was because employees were empowered won’t cut it. The risk for the manager is big, but real innovation and performance improvement are always going to involve risk.