Not so much a "process" as much as a bad planning strategy, or a company structural deficiency (in which the incentive of "tell me what budget you need" is exacerbated).
This seems more like a good example of the kind of mistakes/challenges that an inexperienced manager would encounter.
People are people, which is to say that people will always attempt to game the system, in one way or another. The keyword here being "attempt". Strong and experienced leadership should be capable of not only managing the human nature of the workforce and help bring out people's best, but also have enough experience to understand how to maintain the integrity of the company's culture. There is no perfect system for structuring a group of human beings. You have to deal with things as they come up.
When I think of "one bad process" that could ruin any company...I think of something like, stack rankings, or, partially-automated deployment (e.g. http://www.zerohedge.com/news/2013-10-22/how-lose-172222-sec...)