Transcript Slide 1
Budgeting For Knowledge
NEW JERSEY STATE LIBRARY
TRUSTEES INSTITUTE
MAY 9,2009
PAM ROLLO
What Is the Budget?
Plans defined in financial terms
Evaluation tool
The vital link that exists between planned
activities and financial outcomes
A Document that provides insight into the
activities of a specific entity for a projected
time period expressed in quantitative terms
Budgets Are…
Political
Competitive
Philosophical
Budgets Enable
Translate goals into controllable parts and
tie performance to financial requirements
Allow resources to be allocated ensuring that
programs are successfully delivered
Gauge operational performance
Budgets Should…
Be oriented to help an organization accomplish goals
and objectives
Be realistic plans of action
Provide a framework for evaluation, performance
and improving budget planning
Be participatory
Not be used to deny opportunity
Be the Vehicle for modifying the behavior of
employees to achieve company goals
Why Do People Hate to Budget?
Budgets are seen as an impediment to
goals
Seen as revealing weakness
People are fearful of not
doing it properly and
hampering the institution
Why Budget?
Gain control
Enhance productivity
Gain knowledge about the organization
Align with the strategic plan
Reveal the expertise of the organization
Strategy and the Budget
Mission
Vision
Budget is the monetary expression
of the strategic plan
Budgets follow strategy, Strategy
doesn’t follow budgets
Budgets and Funding
State
Municipality
Friends of the Library
Special fundraising for unique
efforts
How do Trustees Help?
Understand the Library’s financial needs
Collaborate with the Library Director and become
knowledgeable about the Library’s goals
Be aware of the Library’s previous financial performance
Have knowledge about the Library’s opportunities for local,
state and federal funding
Become knowledgeable of supplemental sources of
revenues
Understand the basics of legal and reporting requirements
for funding
Budgets Measure and Reveal
Examine costs
Investigate processes
Explore new opportunities
Test assumptions
Why Don’t People Measure
Suspect that it is a time waster – will reveal what
we already know
Fear that their performance will be found
inadequate
Fear that they will lose influence
Fear that the they will be judged against unfair
standards
Confused by what system to use
Confused as to where value lies
Policy Confirmation and Data Gathering
Collaborative understanding of the human resource
policy (job sharing, benefits expense, training costs)
Ensuring good job descriptions
Clear understanding of what the library currently
does for whom and with whom
Clear understanding of current staff capability
Facility planning ( cost per square foot full loaded)
Square Footage devoted to collection, people and
programs
Budget Influences
The
Economy
Customer
Demands
Community
Needs
Library
Objectives
What to Measure?
Break it down to Measurable Units
What services does the Library provide?
Where do the Library’s programs take place?
Who participates in executing them?
What are the costs affiliated with these
programs?
Who attends these programs?
What is the Unit Cost?
Getting Information from the Community
Email surveys
Print surveys
Summits and forums
Trial programs
WEB 2.0 - Social networking tools
Touching non-members
Soliciting input from community thought leaders
Prioritize Your Services and Activities?
Do you have sacred cows?
Benchmarking and Measuring
Competitive resource
Fosters innovation
Supports viability
Reveals core competencies
Should be embedded in the strategic plan
Defines value
Measurement Models
PLA standards
http://www.ala.org/ala/mgrps/divs/pla/plapublicatio
ns/pldsstatreport/index.cfm
Comparative library performance
http://nces.ed.gov/surveys/libraries/librarysearch/
http://harvester.census.gov/imls/publib.asp
Compare to other community services
Balanced Scorecard
Robert Kaplan and David Norton
Qualitative and quantitative
Concentrates on customer satisfaction
Provides a complement to financial
measurement
Management system and measurement
system
Employees themselves decide what to
manage and count
Key Performance Indicators
Standards document educational, operational and
financial benchmarks
Standards come directly from the strategic plan and
support the Library’s goals
Standards should be performance based and link to
quality experiences
Demonstrate that the organization knows what
success looks like
Balanced Scorecard
illustration from www.balancedscorecard.org
Targets of the Scorecard
How do customers see us?
At what must we excel?
Can we continue to improve and
create value?
How do we look to our supporters?
How do we look to our detractors?
Where does the Score Card fit?
Illustration from www.balancescorecard.org
Learning More About the Scorecard
Identifying key performance indicators
Determining what success looks like
Putting the plan on the calendar
Linking the KPI to the budget
http://www.balancedscorecard.org/
Budget Techniques
Line item or percentage budget
Formula budget
Performance budgeting
Management by objective
Zero based budget
Budget Types
Formula budget
Function budget
Program budget
PPBS (planning, programming, budgeting system)
MBO (management by objective)
Zero based
Formula Budgets
Mechanical
Applies to all services equally
Each service is measured against the same criteria
Facilitates comparisons among units and year to year
comparisons
Reduces paperwork
Eliminates details
Function Budgets
Targets the task to be accomplished
Bundles related costs into the complete cost of
performing the process
PPBS
Overlooks the current base and concentrates on
future activities
Combines budgeting and planning
Expects a scenario of alternatives with an
accompanying cost of analysis
Measures scenarios against performance
Clarifies authority and responsibility
Traditional Fixed Budgeting
Increase or reduce by some set percentage
Don’t ask, don’t tell
Do the same with less or more with less
Reactive and expensive if business conditions are guessed at incorrectly
Political and not financial
Characterized by competition
Difficulty in linking benefits of costs to quality of investment
Drops costs in equal amounts over the 12 month period (seasonality vs.
equal distribution)
Scrutinizes the monthly variance
Zero Based Budgeting
Defines, lists and ranks activities
Determines the point at which programs can not be
supported
Creates all inclusive “decision packets” which
contain 1) measurable performance objectives 2)
appropriate actions to achieve performance
objectives 3) resource allocations and 4) methods for
carrying out the activities
Management by Objective
Sets tangible, verifiable and measurable goals
Lists and links the activities necessary to meeting those
goals – high tactics
Analyzes the activities in a step by step progression
Costs the activities
Links the activities to the calendar
Encourages participatory management
Provides motivational benefits
Benefits to MBO
Motivates the team
Strengthens relationships
Provides a framework for coaching
Eliminates weak appraisals
Provides knowledge of what is expected
Increases satisfaction
Activity Based Budgeting
Shifts from detailed plans to trend analysis and
rolling forecasts
Takes into consideration the real financial position
Based on performance
Performance is documented by KPIs
Monitored by flashes against rolling forecasts
Ramifications of Activity Based
Goals are met in “real time”
Act while resources are available
Consistent execution plan
Effective use of investment – clear linking of tactics
to success
Link service to expectations of users
Remember when Preparing
Know your audience
Avoid surprises
Quantify, quantify, quantify
Concise and polish
Stories Count – Use modern tools
Ample supporting documentation
Rehearse those answers
Success is Measured
How happy are the clients
Does something new and remarkable happen
Works better than the competition
Works as well or better than other libraries
Meets and sticks to the plan
Flexibly meets new challenges
Other Places of Inspiration
http://www.oclc.org/us/en/par/default.htm
Online Computer Library Center
http://www.urbanlibraries.org/
Urban Libraries Council