Budgets: The 10% Solution
A look at what happens when managers are forced to keep budgets down.
This is the time of year when owners dream of "zero-based budgeting," of making every manager justify every expense before signing off on next year's budget, but -- as you've no doubt discovered -- it's tough to achieve that in the real world. Bob Rogers has a more practical suggestion. Rogers used to work at Marion Laboratories (now Hoechst Marion Roussel). His boss, legendary entrepreneur Ewing Kauffman, dealt with creeping expenses by insisting that managers start budgeting at an expense level 10% lower than that of the current year. They then had to justify the 10% before adding any additional expense for the coming year. The practice worked well enough for Kauffman, who went on to own the Kansas City Royals and to found the Ewing Marion Kauffman Foundation -- of which Bob Rogers is now chairman and CEO.
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