Management Bug: Budget Constraints

A MngtBug is a problem, cause or impact in a human manager’s decision which produces an incorrect or unexpected result.
Every week we share a little bit of our knowledge base on social media and our newsletter. Since we believe the Management Bugs are common and typical, every description is created and adapted from articles, blog posts and definitions from other sources and authors.

This week’s MngtBug is…

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Have you ever seen this MngtBug? How did you solve it?
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Details

This week’s “Budget Constraints” is a common problem in many companies either big or small.

By definition, when consumers’ income limits their consumption behaviors, this is known as a budget constraint. Budget constraint constitutes the primary part of the concept of utility maximization.
(Extracted and adapted from https://www.intelligenteconomist.com/budget-constraint/).

Most people are constrained by their income while making their choices.
(Extracted and adapted from https://financetrain.com/budget-constraints/)

This can be expressed as a mathematical equation and is equally useful whether the consumer is an individual, a family or a business.
(Extracted and adapted from https://www.sapling.com/7903562/budget-constraint)

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Where Y = income, PA = price of item A, and QA= quantity of item A consumed. PB = price of item B and QB = quantity of item B consumed. A store does not have the money to buy more inventory, its ability to sell is constrained. Similarly, if more employees are needed, but the budget cannot accommodate additional salaries, growth is limited.
(Extracted and adapted from https://study.com/academy/lesson/budget-constraints-definition-formula.html)

Corrections for financial constraints are often complicated; however, shifts within the existing budget are often possible in the absence of an increased overall allowance.
(Extracted and adapted from https://bizfluent.com/info-8366449-business-constraint.html)

The budget constraints in companies are a reality and need to be present in every decision of top management like hiring human resources, in acquisitions and employee training.

Known Associates

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This MngtBug has been mentioned with several MngtFixes such as…
“Training Budget Allocation”,
“Training Budget Definition”,
“Leadership Training”,
“Know-how Transfer Sessions Implementation”
and of course “Finance Training”!

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Have a nice week and remember…
Human Managers should be open to being inspired and inspire others!

Written by

Eduardo Espinheira is a Consultant, Facilitator, Manager, Public Speaker, Creator of the Management Bugs&Fixes and the Machiavellian PM Stories

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