During the US federal government’s sequestration process, I worked with several Generals at the Pentagon who were tasked with making significant budget cuts. One particular command was directed to cut 10% from its budget and report the impact using the Pentagon’s stoplight system. Surprisingly, the command reported back with all green indicators, signaling no adverse impact on any projects.
The four-star General I was working with wasn’t satisfied with this response. He sent the same command, a requirement to cut another 10% and report back. Again, the report came back all green. Seeing this pattern, the General issued a final directive to cut an additional 20%, and once more, the command reported back with no issues—everything was green.
At this point, the General knew something wasn’t right. He summoned the command’s General to the Pentagon for a face-to-face meeting. After dismissing all but myself and the Inspector General, the four-star looked directly at the command General and said, “You are either negligent in budgeting or engaging in rampant fraud—so which is it?”
The room was silent, and the command General began to sputter, realizing the gravity of the situation. The four-star continued, “Every cut should already be impacting basic functions. If you can’t talk about the impact with the first cut, then you had too much budget to start with. If you’re not cutting important things that commanders have already prioritized, then you’re not thinking through the budgeting process on the front end or the back end.”
The lesson here was clear: Budget cuts should be painful to leadership, not just to the rank-and-file workers. The refusal to acknowledge the impact of these cuts reflected a deeper failure to properly assess and prioritize the budget, leading to poor decision-making that could jeopardize the command’s ability to function effectively in the long term.
he story highlights several critical budgeting mistakes made by the command during the sequestration process:
- Failure to Prioritize Essential Functions: The command’s repeated ability to cut significant portions of the budget without reporting any impact suggests a failure to prioritize essential functions. This indicates that either the budget was excessively inflated, or the command did not properly evaluate which projects were truly critical.
- Neglecting to Assess the Impact of Cuts: The command reported no negative impact despite multiple rounds of budget reductions. This neglect in assessing and reporting the real effects of the cuts raises concerns about the accuracy and thoroughness of their budgeting process.
- Lack of Transparency: By consistently reporting “all green” despite substantial cuts, the command demonstrated a lack of transparency. This could be interpreted as an attempt to avoid scrutiny, either due to negligence or a deliberate effort to obscure the true state of the budget.
- Misalignment of Budgeting with Strategic Goals: The failure to align budget cuts with the command’s strategic goals or priorities led to the General questioning the integrity of the budgeting process. Effective budgeting should reflect a clear understanding of how resources support mission-critical activities.
- Potential Over-Allocation of Resources: The General’s comment that “if you can’t talk about the impact with the first cut, then you had too much budget to start with” suggests that the command may have been operating with an overly generous budget. This implies a lack of rigorous budget planning and resource allocation from the outset.
- Avoiding Hard Decisions: By reporting no impact, the command avoided making the difficult decisions that should accompany budget reductions. Budget cuts are supposed to force a reevaluation of priorities, but the command’s response indicated a reluctance to engage in this process.
- Undermining Leadership Accountability: Budget cuts should challenge leadership to make tough choices and bear the consequences of those decisions. The command’s failure to acknowledge any impact undermined this principle, shifting the burden away from leadership and potentially harming operational effectiveness.
These mistakes reflect a broader issue of inadequate budget planning, poor communication, and a lack of accountability within the command, all of which can lead to inefficiencies and risks in mission-critical operations.