The conference room was filled with the friendly buzz of chatter between colleagues when Marisa Hernandez entered.

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The conference room was filled with the friendly buzz of chatter between colleagues when Marisa Hernandez entered. As she sat, she noticed that she was the last of the marketing
staff to arrive for the budget meeting.

“OK, now that Marisa is here, we can get started,” smiled Tom Davis, director of marketing. “The purpose of this meeting is to review the budgets you have all submitted and then chop off 15 percent.” This remark was met with nervous laughter, as Tom smiled ruefully. “Sorry, gang, but it’s true. If we can’t improve our profitability by another 5 percent, it seems that our parent company will sell us off after this year. So top management has asked everyone to reduce their costs by 15 percent without losing sight of their sales goals.”

Marisa groaned. She was relatively new and was responsible for managing trade shows and other special events, but she had been there long enough to know that the company had been wasting its trade show money in the past. With a little rearranging of the show schedule and the increase in budget she had asked for to build a new booth, she felt sure that she could increase the number and quality of leads enough to handle the 12 percent increase in sales that management had already asked for. Cutting 15 percent of the budget, though, eliminated the new booth.

Tom passed out copies of the summary budgets of each department. “Whoa, here’s the culprit right here,” exclaimed Shelly Tap, national sales manager. She slammed the copies to the table, saying, “Our trade show budget request is 30 percent higher than last year.” Turning to Marisa, she said, “I can’t cut our budget 15 percent and expect to
reach the sales target, but if you cut yours to 5 percent less than last year’s, that’ll equal 5 percent of my budget.”

“But if I can upgrade the quality of leads you get, as well as the quantity, you can still achieve your sales targets,” replied Marisa, trying to hide her irritation. For some reason, she didn’t hit it off with Shelly.

“Oh, sure. Everyone knows that trade shows are just a wild party. We haven’t closed a lead from one in years.” Shelly, along with all of the other staff, laughed. “Look, Tom, let’s put our money where the results are, and that’s in sales.”

“Yeah, Tom, and you know how important advertising is to our image,” added Brian Black, director of advertising. “We can’t possibly cut 15 percent.” At this point, Marisa began to worry about keeping her job.

1. What type of information does Marisa need to justify her proposed budget? Where would she go to get that information?

2. Similarly, how would any other marketing managers justify their budget requests?

3. What type of budgeting does it seem the company does now? What should the company do? What challenges will Tom face in implementing a different budgeting process? How should Tom go about that implementation?