CAPEX Forecasting & ineffective measurements — a deadly concoction of sandbagging & rent-seeking behaviors.

Background

At my previous workplace, the financial year was between August and July. All leaders in the organization that worked with infrastructure assets had to project their yearly Capex needs (data center machines, storage, software licenses, contractor spending, training, etc.) by the end of June. This was always a stressful exercise since -

a. If you over-budget and have an unused budget, you get penalized in performance ratings.

b. If you are under budget and fall short of your growing needs, you need to ‘borrow’ from other leaders who may have spare capacity, which requires a lot of network building and bartering.

Keep reading if you see your organization has a similar exercise.

Issues with measuring this for performance rating

While I understood the rationale from a financial forecast standpoint, and the broad majority of leaders used extensive analysis & heuristic measures to arrive at forecasts, a few leaders had figured out how to game the system. They constantly were sandbagging their forecasts and, over the course of the year, were in a position to offload excess capacity to teams in…