Budgeting For Knowledge

1. Budgeting For Knowledge New Jersey State Library Trustees Institute May 9,2009 Pam Rollo

2. 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

3. Budgets Are… • Political • Competitive • Philosophical

4. 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

5. 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

6. 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

7. Why Budget? • Gain control • Enhance productivity • Gain knowledge about the organization • Align with the strategic plan • Reveal the expertise of the organization

8. Strategy and the Budget • Mission • Vision • Budget is the monetary expression of the strategic plan • Budgets follow strategy, Strategy doesn’t follow budgets

9. Budgets and Funding • State • Municipality • Friends of the Library • Special fundraising for unique efforts

10. 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

11. Budgets Measure and Reveal • Examine costs • Investigate processes • Explore new opportunities • Test assumptions

12. 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

13. 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

14. Budget Influences Customer Demands The Economy Library Objectives Community Needs

15. 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?

16. 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

17. Prioritize Your Services and Activities? Do you have sacred cows?

18. Benchmarking and Measuring • Competitive resource • Fosters innovation • Supports viability • Reveals core competencies • Should be embedded in the strategic plan • Defines value

19. Measurement Models • PLA standards http://www.ala.org/ala/mgrps/divs/pla/plapublications/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

20. Balanced ScorecardRobert 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

21. 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

22. Balanced Scorecardillustration from www.balancedscorecard.org

23. 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?

24. Where does the Score Card fit?Illustration from www.balancescorecard.org

25. 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/

26. Budget Techniques • Line item or percentage budget • Formula budget • Performance budgeting • Management by objective • Zero based budget

27. Budget Types • Formula budget • Function budget • Program budget • PPBS (planning, programming, budgeting system) • MBO (management by objective) • Zero based

28. 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

29. Function Budgets • Targets the task to be accomplished • Bundles related costs into the complete cost of performing the process

30. 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

31. 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

32. 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

33. 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

34. Benefits to MBO • Motivates the team • Strengthens relationships • Provides a framework for coaching • Eliminates weak appraisals • Provides knowledge of what is expected • Increases satisfaction

35. 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

36. 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

37. 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

38. 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

39. Other Places of Inspiration • http://www.oclc.org/us/en/par/default.htm • Online Computer Library Center • http://www.urbanlibraries.org/ • Urban Libraries Council