Why managers pad budgets and build empires: the law of anticipated reactions

To some extent, the strength and security of an organization is associated with its size, the rank of its personnel, and the amount of funds available to it…

 

A second factor working in the same direction has been termed the law of anticipated reactions. An administrator expecting higher echelons to cut his estimates will insure himself against serious damage by building them up to the maximum that he can reasonably defend – and sometimes beyond it.

 

To the outsider this appears as “padding” and “empire-building,” but the perpetrator can rationalize it as only common sense and self-protection. It is not unknown that budgets be padded as a favor to reviewing bodies; it gives them an opportunity to make and proclaim cuts without real damage. Indeed, the very expectation of budget review may encourage budget padding.

That was from the excellent Frederick Mosher in his 1954 classic, Program Budgeting: Theory and Practice. This is in part why the “requirements” approach to building budgets based on programs may lead to ever-declining force structures. Fixed budget ceilings and relative autonomy to maximize within that allow leadership to focus on making tradeoffs rather than justifying higher budgets.