Dilemma 1:

Jennifer, 17, is editor of the high school yearbook. She directs a team of 28 students who are active in the yearbook club. Each year the school sets aside a fund for the club, and Jennifer reports on club activities to her faculty club advisor. One of Jennifer’s toughest challenges as editor is to plan for expenses; it’s easy to underestimate photography and printing costs. So she is thrilled at year’s end once the club has put the finishing touches on the yearbook to find out that it has come in under budget. Jennifer mulls over how to use the surplus funds. After all, the school set aside the money for the yearbook club to use. Because she must turn in purchase orders to the faculty advisor, she simply can’t spend the funds on a club trip, say, to an amusement park. She doubts that her advisor would approve that purchase order. But she could allot to each club member the money to make wall posters of their favorite yearbook photos at the print shop. Is it OK for Jennifer to spend the money this way?

Batstone:

Jennifer has stumbled into a gray zone – where few black-and-white answers live - of financial accountability. The school has set aside the funds for the yearbook club, and Jennifer does not distribute the money for any other purpose. A review of the financial reports at year’s end will confirm that she has done excellent work at managing her club’s funds. Her only clear error is trying to hide from the faculty advisor how she actually plans to use the surplus money. Why not approach her advisor directly and offer a good argument for using the money to reward club members? Maybe the teacher won’t OK a trip to Six Flags – hey, it’s worth a shot – but it would not be unreasonable to ask for wall posters that show off the club’s best stuff.

If Jennifer one day pursues a career in business, she’s likely to encounter this dilemma again and again. Most companies of any significant size delegate financial budget responsibilities to their managers. The amount of money they are given to manage usually is based on a projection of what it will take to get a project done. No manager wants to overspend on a project. In a company with limited imagination, managers may not want to leave a surplus at year’s end either. Why? They may fear that their thrift will lead company executives to lower their projected budget for the following year. For that reason, managers may seek “creative” ways to drain their budget. A company with visionary leadership, on the other hand, will find ways to reward managers – and the people who work in their project – for staying on budget; even more so when they are able to leave a surplus.