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March 2015

Budgeting for Success

Department heads can get the funds they need if they make the business case for their requests.

Written by Jeff Schmidt, General Manager, Red Lodge Mountain, and Rick Kahl | 0 comment

It’s a common problem: Your department needs resources so that it can function safely and efficiently. But corporate budgets are tight, and probably getting tighter. How can you make sure your department gets its fair share?

Simple answer is, get involved in the budget process. Don’t simply react to a plan that comes down from management—get involved beforehand. That might mean planning up to 18 months in advance for maintenance and staffing, or even longer for most capital expenditures (new equipment or facilities).

Once you know your timeframe, get organized and develop a plan. What expenditures are most pressing? Which ones are essential? How will the department or overall resort benefit? Efficiencies, labor savings, safety, increased guest satisfaction, decreased down time—these are all good justifications for your budget requests. Make sure your management understands these benefits.

The best way to communicate all this is to put your budget needs or requests into a handy Excel spreadsheet that will justify your request (see example below). This should include cost, savings, efficiencies, return on investment, and anything else that may apply. If you don’t know how to create an Excel spreadsheet (the tool your manager probably uses to evaluate and develop budgets), get your finance department to help set one up, or learn on your own.

This is the single most important step you can take.


Two Points of View
Recognize that your department and your GM have a few common goals, as well as some goals that may be unique.

For example, your budget request aims to satisfy several needs: safe operations for guests and employees, minimal down time, adequate staffing, proper training, tools, equipment, and supplies. Many departments also require adequate transportation.

You also have a few related or indirect budgetary goals: clear direction and recognition from management. In fact, if you get these from your management, the rest of your budget is likely to suit, to the extent that the area has sufficient cash to fund the department properly.

You and your manager might view your department differently. First and foremost, management is trying to make a profit. Without that, nobody gets the budget they want. To that end, management seeks safe, reliable operations, as well as satisfied guests and a good business reputation. Managers also know that stable, predictable expenses and minimal surprises make planning easier. And they know that all of this requires an engaged, competent staff.

Management has to consider these broad goals and aims in relation to each and every department. Your budget requests are weighed against those of others. If you can show how your budget and operations impact the resort’s broader operations (and income), you help your manager make informed decisions. You won’t always get everything you want, but at least your manager has the information to make good choices.


Setting Priorities
First and foremost for everyone is safe operations for guests and employees. Therefore, highlight expenditures that directly relate to this. In addition, highlight those safety-related expenses that pertain to “mandated” (required by government rules and standards or manufacturer warranties) or “essential” (parts, materials, staff) items. Nightmares of catastrophic failures keep managers awake at night; show them how your budget minimizes the chances.

At the same time, no manager likes to receive a constant stream of bad news or dire predictions. Instead, present options and expected outcomes.

There are plenty of other valid reasons for requesting funds. Support your budget line items by stating the benefits of each. Increases in efficiency, labor saving, safety, increased guest satisfaction, and decreased down time are benefits that help managers evaluate your request.

For your benefit as well as the boss’s, divide your requests into “need to have” and “discretionary” categories. Indicate whether these are maintenance items or an upgrade or strategic improvement (i.e, a capital investment or expenditure). Both can be entirely reasonable, but management needs to know which is which.

For a proposed capital improvement, point out the cost of maintaining old equipment and procedures; these help offset the cost of the new.

Point out those items that are truly discretionary. These may meet specific aims and objectives, and may contribute mightily to improving the resort’s profitability. Nonetheless, management needs to know if not having them will create safety hazards or practical hardships.


The Big Picture
Consider, too, how management views your department and its relationship to the resort overall.

Take the lift department. Does management view lifts as an integral and essential part of the operation, or a necessary evil? Top management has shifted toward financial managers; if yours is not familiar with lift operations, you have a lot of explaining to do.

It can be frustrating to both management and the department if the GM doesn’t know the details of mechanical and electrical systems, and therefore finds it difficult to evaluate budget requests. So, remind the GM that as much as half of the resort’s total revenue comes from selling lift tickets. No lifts, no revenue. Then do your best to describe the situation in layman’s terms.

If you make it easy for management to understand how your budget request minimizes potential headaches, you can expect to receive your share of the company’s cash. Managers don’t like surprises. They prefer stable, reliable operations. In a business where managers face a steady stream of decisions and unanticipated issues, no news is good news. That’s especially true from a department that has the potential to inconvenience, upset, or injure a large number of people, and where unexpected large expenditures are a source of major headaches.

Whether your presentation leads to the budget you need depends on a lot of other considerations, some of which are out of the GM’s control. A poor season—whether it stems from weather problems, low snowfall, or a poor economy—can handcuff the best of leaders. There may also be owners, bankers, shareholders, and guests to satisfy, too. The GM has to make sure all departments operate effectively, and balance expenditures with cash flow—which may mean postponing purchases when revenue is scarce.

Therefore there’s one essential, final piece of advice: Look at the big picture, and don’t take the boss’s decisions personally. Chances are good that your GM is doing the best he or she can to run the resort brilliantly. There are lots of departments competing for scarce resources.

You may not get everything you want. But if you help your manager develop a long-term vision for your department, you are likely to get what you need.