Leading a Lab Under Budget Pressure
The right approach can turn a reduced budget into a positive learning opportunity
An important responsibility for lab managers is to develop a budget that will meet the needs of the business and enable the lab to function in a productive and effective way. Laboratories are asset-heavy portions of the business, and getting the budget right is an essential part of the overall business strategy. A lab manager must be able to make data-driven decisions about priorities and communicate these decisions to the business.
Ideally, the budget would be built right the first time, but the following scenario is usually more realistic: You spent the past two months building an effective budget. You met with senior managers to get their perspective and to determine the high-priority projects for the year, and how you will need to support them. You met with your team to get their input on projects, instrumentation, supplies, and learning opportunities for the upcoming year. You reviewed the spending trends for the past couple of years and adjusted expenses for inflation. You even mapped out the spend for each category month by month so that you can track the budget and identify months that will be high or low spend. You put all this together in a great document and submitted the perfect budget for approval. A few days, weeks, or months later, you receive an email stating that your proposed budget has been denied due to business needs, and you will have to work with a reduced budget. All the effort and planning feels like a waste of time, and you start scrambling to figure out what to do next.
This is a story that happens all too frequently for lab managers. However, there are ways to make this less of a dramatic event. All the preparation you put in prior to submitting the budget will make working with limited funds a much smoother task.
Surviving budget cuts
When asked to make cuts to the laboratory budget, careful thought should be given to specific cuts, rather than making a blanket percentage cut across the board. A good approach for accomplishing this is to break the budget down into categories such as personnel, projects, equipment, supplies, and lab safety/operations. Before getting into specifics for cutting funding from each of these categories, there are some important overall concepts that should be kept in mind.
First, remember that you own the budget. Prevent yourself from having a victim mentality. While you can’t get everything you want, you still have control over how to spend the money that you do receive. Avoid the feeling that budget cuts are personal. Looking at a budget cut as an opportunity to improve the business will prevent you and your team from developing a sense of helplessness.
Another important approach to consider is to keep lab personnel involved in the budget process. Doing so keeps staff informed about changes that might occur and give them opportunities to present suggestions on where and how to make budget cuts. Having one of your direct reports in charge of tracking the budget is a great way to get them involved and develop skills that will help them later in their careers. By being transparent with your team, you will have a better understanding of their needs and wants. This approach empowers your team and switches them from complaining about cuts to actually providing solutions to the budget challenge.
“While you can’t get everything you want, you still have control over how to spend the money that you do receive.”
Be sure to track your spend monthly to see where changes can be made to help meet your budgetary restrictions. This will allow you to switch money between different categories to make the most efficient use of your funds. Another benefit of tracking your budget closely is that you can show management how well you are handling your budget. This builds a sense of trust and will help management justify giving you additional funds when available. Also, stay informed about the status of the business. Understand what to expect during the year. Will there be more budget cuts? Will funding become available later in the year?
Techniques to maximize your budget
With these concepts in mind, there are several techniques that can be used to adjust spending in individual categories.
Personnel: The most difficult part of being a manager is having to let someone go due to layoffs. Not only does this impact the person leaving, but it also has ramifications for the entire team. When put into this situation, try to preserve essential staff and knowledge the best you can. Work with your HR team to be prepared to meet with the person being laid off and be honest, direct, and compassionate. Take this same approach when relaying the news to the rest of the team.
Another demotivating situation is when lab personnel have their training and growth opportunities cut. If you truly believe that your people are the most important part of the lab, you need to find a solution to address this issue. Be creative to find ways to grow your people—this will ensure the long-term success of your team. Evaluate cross-training opportunities both within and outside of the lab. With the advent of more work from home situations, there are more online training courses available than ever before, and you can often find low-cost or even no-cost options.
Raises and promotions may be put on hold during cash-short times, so don’t make promises to your people that you can’t keep. Be honest about the situation. Find innovative ways to give high performers new challenges and opportunities to develop. Let them lead projects, make presentations, and increase their responsibilities so that when raises and promotions are available again, they will be in a great position to receive them.
Projects: The key to handling cuts for project support is to be honest with your customers. Don’t overcommit to more projects than your budget can address. Explain to management and customers how the new budget will impact what will be supported and reach agreement on what the true priorities will be for the year. Look for creative ways to find additional funds for projects. Often, project managers have additional funds for their projects that can be diverted to the lab to offset your budget cuts. They may even have people working on the project with a lab background that could actually do some lab work in support of the project.
Equipment/Instrumentation: While these are assets typically handled on a multi-year plan, there are still some things you can do to help during budget cuts. Try to ring-fence the money required for repair and maintenance issues. This is critical to maintaining a lab at peak efficiency. When dealing with capital purchases, be sure to understand the difference between wants and needs—have strong justifications for the things that you must buy this year, and if possible, give back the money needed for items that can wait. One important tip is to have valid quotes on instruments at all times. Money can often become available during the year that must be spent quickly and if you have all your quotes in order, you can cash in on those opportunities.
Supplies: Review your supply purchases and confirm that you are buying the appropriate level material for your needs. Get the quality level that is required for your application and don’t over-specify. Beware of buying too much in bulk. Although prices may be lower, there is nothing worse than having supplies or chemicals expire before use. Carrying large inventories of supplies is not an efficient use of materials, so see if you can work with your company’s commercial team to strike deals with your suppliers. While everyone thinks that they are great negotiators, your commercial team is trained in this area and can often get better deals in ways that you never considered.
While no one enjoys getting their budget denied or cut during the year, this is a fact of life for lab managers. Having strategies for addressing these situations is an important tool in your management toolkit. Be prepared for these types of situations and have contingency plans in place as you develop your yearly budget. View the budget changes as a positive way in which you are going to help the business reach their yearly goals. Get everyone from you team involved in the process so they feel empowered and will have a direct impact on decisions. Be honest with management and customers to work toward the best possible outcomes given the situation. Show your willingness and ability to find creative solutions and think long-term. Demonstrating to management and your reports that you are proficient and responsible with your budget can result in increased trust and funding in the future.
