Careers Career Paths Budget Exercise Share PINTEREST Email Print Uwe Krejci / Getty Images Career Paths Finance Careers Technology Careers Sports Careers Sales Project Management Professional Writer Music Careers Media Legal Careers US Military Careers Government Careers Fiction Writing Careers Entertainment Careers Criminology Careers Book Publishing Aviation Animal Careers Advertising Learn More By Mark Kolakowski Mark Kolakowski Mark Kolakowski is a business consultant, freelance writer, and business school lecturer. He has been an investor and market watcher for 40 years. Learn about our Editorial Process Updated on 01/12/20 A budget exercise, also frequently called a budgetary exercise or a budgeting exercise is a commonplace piece of corporate and financial jargon. It normally refers to an urgent expense-cutting effort, usually spurred by financial underperformance. When profits are running significantly below budgets or expectations, a crash effort to cut expenses aggressively is the normal response. Simply put, the typical company has much greater control over expenses than over revenues. Incidence Budget exercises are quite common in large, publicly-traded companies, which are concerned about the impact of short-term reported earnings on the perceptions of securities analysts and investors, and thus on their stock prices. They are less common in small privately-held companies, nonprofits, and government agencies. Frequency In some companies, budget exercises are highly predictable annual events, sometimes in the summer, sometimes in the fall, and sometimes in both time frames. Controllers, budget department staff and financial analysts in companies that habitually run one or more budgetary exercises annually should note that their jobs can be especially stressful on an ongoing basis. Methodology A budget exercise frequently involves across-the-board mandates for all departments to reduce spending by a stated percentage of their budgets for the rest of the year. Sometimes these mandates also can apply to groups that have underspent their budgets to date. In companies that do this, managers are bound to develop a strong bias towards spending as much they can as early as they can in the fiscal year. Budgetary exercises typically include restrictions on new hiring. These can be either across-the-board reductions in the number of new heads that each department can add for the remainder of the year or a complete hiring freeze. Moreover, in addition to expense cuts, budget exercises also can involve reductions to capital budgets. Job Search Impact Generally speaking, the later in the year that you seek employment at a given firm or in a given department thereof, potential budgetary impediments to being hired increase. These impediments include reaching the budgeted headcount for year-end and/or have spent on employee compensation reach a rate which, when extrapolated to year-end, will meet or exceed the full-year budget. In these situations, the department's ability to hire may be severely restricted, if not suspended, for the remainder of the year. By contrast, the most fruitful period for getting hired normally is early in the year. Managers who have been budgeted additional heads may seek to add them as soon as possible before potential budget reductions or headcount freezes are imposed. For all these reasons, those seeking employment during November and December may actually have to wait until after the New Year to start work. In this case, getting the opportunity to interview late in the year often is a means to position yourself at the head of the hiring queue for the following year. Note, however, that there are many exceptions to this rule. A strategic area may be granted a special exemption to continue hiring and exceed its budget. A manager with political clout may get a special dispensation from senior executives to continue hiring. A company with a fiscal year that ends before December 31 (e.g., Morgan Stanley ends its fiscal year on November 30) may be an especially promising place to seek employment late in the calendar year since managers will be spending and hiring out of new annual budgets then. Finally, some companies, especially those in retail, may have their busiest seasons in November and December, and thus may be hiring briskly then. In companies paying year-end bonuses, employees intending to leave often postpone their moves until soon after their bonuses are paid. This is another scenario where interviewing late in the prior year to get considered as a potential replacement can be worthwhile.