We have dozens of examples where a 'silo based' budget has been introduced, leading to an increase in costs for the organisation as a whole.
We know that 'everything is connected' and yet the focus on budget savings seems to keep leaders blind to the big picture, often provoking target driven behaviors that detract from overall performance.
We see this in private and public sector alike. One private sector example that springs to mind is in respect to bonuses and budgets. We know senior managers who had a significant reward in the form of a bonus payment tied to their performance within their contract. To ensure they received this bonus they held back orders from the end of one financial year, when already ahead of target, so they could give themselves a head start on next years targets. They did this irrespective of the delay it created for the customer and the lost revenue not booked and billed for the company ... we've also seen people in similar conditions pull in false sales to hit target and qualify for their bonus, only to issue a credit note the following month once they'd banked their bonus payment. In many ways, the stock-market requires this kind of 'target driven behaviour', because senior exec's are considered incompetent if they are more than 5-6% under OR over their annual forecast. The market loses confidence in a CEO who can't predict turnover a year ahead and share prices suffer as a consequence, even if the organisation has out-performed predictions and increased profit ... it's a very strange world.
The private sector can boast similar quirks and often does. We have many examples which show an array of savings that look good in isolation, but have added in excess of £1/2M to costs when looking at the bigger picture. These feature such things as poor route planning in Passenger Transport, where contractor costs look to be reduced within individual routes but increase the overall annual spend and similar issues that extend beyond Local Authorities and into other services, seeing council decisions to cut costs drive more cost for the local Police force than they are saving.
We'd be interested to hear any stories you have where the focus on the detail increases the big picture costs. We're not on a witch hunt, we don't want anyone to name and shame, or identify where it happened, but we'd love to hear about things in principle so we can help our audience appreciate the complexity of systems and show how cause and effect is sometimes a very big picture indeed!