lect13 budgeting

8/2/2019 Lect13 Budgeting

1/16

Nigel H.M. Wilson 1.259J.11.542J/ESD.227J, Fall 2006 slide 1Lecture 13

Outline:

What are the purposes of budgeting systems?purposes of budgeting systems?

What is program budgeting?program budgeting? What can it accomplish?

What are the potential pitfallspotential pitfalls of instituting such a

system?

What strategystrategy was used to implement it at the MBTA?

What happened? A cautionary tale about organizationalorganizational

change.change.

_______________

* Based on work by Arne Howitt of the Harvard University Kennedy School of Government

Lecture 13: BUDGETING*


2/16


Control

Efficiency

Resource Allocation/Planning

Team-Building Public Education and Accountability

Purposes of Budgeting


3/16


Program budgeting is a decision-making process

that helps an organization consider how differentbudget options would affect its performance

Program budgeting focuses on the efficiencyefficiency and

resource allocationresource allocation functions of budgeting. It can

contribute to controlcontrol and teamteam--buildingbuilding as well.

Program Budgeting


4/16


Compared to conventional incremental

budgeting, program budgeting promises:-- more reasoned decisions

-- probing of the organizations base budget

-- logical connections between budgeting and otherkey management processes

-- improved capacity to explain and defend budgetchoices

-- improved team-building

Program Budgetings Benefits


5/16


Mission Statement

Goals/Objectives

Programs

Activities

Impacts/Results

Strategic

Planning

Program

Building

Program Budgeting in Perspective


6/16


Demand or Workload-- e.g. number of engine overhauls, staffing needs

Inputs, Resources, or Expenditure Objects-- e.g. personnel, materials, equipment

Outputs or Products-- e.g., passenger miles of service, buses preventively

maintained

Outcomes or Impacts-- e.g., single-occupant vehicle trips averted

Program Budgeting Data


7/16


PROGRAM BUDGETING

Demand/Workload

Resources/$$ Inputs Outputs

Impacts/Results

StrategicPlanning

Unit Costs

Financial MIS MonthlyMgmt Report

Program Budgeting Linkages


8/16


Excessive expectations

Over-centralization of decision-making

Energy and skills spread too thin in effort toachieve comprehensiveness

Proliferation of paperwork requirements

Inadequate training and technical assistance for

departments Premature efforts to link program budgeting to

other management systems

Potential Organizational Problems


9/16


Keep purposes focused, promised resultsmodest, and system design streamlined.

Develop the system collaboratively in closeconsultation with central management, the

budget office, and department managers Design the system to empower departments to

improve the quality of their decision making,

while central management focuses on its morelimited priority agenda.

Strategy for the MBTA - 1


10/16


Keep the agenda concentrated on priority issueswhere good budget decisions can make adifference.

Keep the focus on substantive budget issues,

not paperwork requirements. Provide effective training and technical

assistance to departments.

Go slowly in linking program budgeting to othermanagement systems.

Strategy for the MBTA - 2


11/16


RESOURCES

PROGRAM ACTIVITY FY94Actuals

FY95Budget

FY95Budget

MEASURE FY94Actuals

FY95Budget

FY95Budget

Albany PassengerService

Total $

TotalFTEs

Total $

TotalFTEs

Total $

TotalFTEs

Operating Cost Per Mile

Number of Riders

Average Fare Per Rider

MDBF

Service-ready Vehicles ($ of Req.)

Percent of Scheduled Trips Run

Complaints per 100,000 Riders

Accidents per 100,000 Miles

Injuries per 100,000 Riders

5863

Mission: To provide safe, clean, and reliable transportationservices for more than 350,000 riders per day

Bus Operations: FY96 Program Budget


12/16


RESOURCES

PROGRAM ACTIVITY FY94Actuals

FY95Budget FY95Budget MEASURE FY94Actuals

FY95Budget

FY95Budget

SERVICE Passenger Service Total $

Total FTEsOperators

LineSupervisors

Management

Total $

Total FTEsOperators

LineSupervisors

Management

Total $

Total FTEsOperators

LineSupervisors

Management

Revenue-Vehicle Mileage

Number of RidersFares CollectedNumber of Scheduled TripsNumber of Scheduled Trips RunNumber of Added Trips RunComplaintsVehicle InjuriesPassenger Injuries

PREPARE FOR

SERVICE

PREVENTIVEMAINTENANCE

CORRECTIVEMAINTENANCE

Total Vehiclesin this Facility

CleaningFueling

Mileage-basedInspectionsSeasonalVehicle

Maintenance

ModificationCampaigns

Air Supply SystemsBrake Systems

EngineTransmissionElectrical/LightingFuel SystemSteering/ SuspensionWheels/TiresWheelchair LiftsVandalismAccidentsOther Reasons

Total FTEs

Fuelers:Foremen:

Total FTEsMechanics:Foremen

Total FTEsMechanics:Foremen:

Total FTEsManagement:

TOTAL

Total FTEs

Fuelers:Foremen:



Total FTEs

Fuelers:Foremen:



Number of VehiclesWashed

Number of Vehicles Fueled

Number of InspectionsNumber of Vehicles CompletedNumber of Vehicles Completed

Number of Diagnosis/RepairNumber of Diagnosis/RepairNumber of Diagnosis/Repair

Number of Diagnosis/RepairNumber of Diagnosis/RepairNumber of Diagnosis/RepairNumber of Diagnosis/RepairNumber of Diagnosis/RepairNumber of Diagnosis/RepairNumber of Diagnosis/RepairNumber of Diagnosis/RepairNumber of Diagnosis/Repair

CABOT FACILITY: SOUTHSIDE DISTRICT

Bus Operations: FY96 Program Budget (cont'd)


13/16


Task Environment

Legitimacy

andSupport

Public Value,Mission

OperationalCapacity

AuthorizingEnvironment ResourceEnvironment

Strategic Alignmentor Fit

Substantively

valuable

Legitimate and politicallysustainable

Operationally andadministratively feasible

The Strategic Triangle


14/16


PU

BLIC

VALUE

LEGITIMACY

AND

SUPPORT

PERFORMANCE

Formal Organization:

Strategic grouping

Formal linking

Hierarchy of authority

Rewards

Information systems

Human resource systems

Career systems

People:

Human resourcecapabilities

Competencies

Critical Tasks:

Component tasks

Work flows andprocesses

Culture:

Norms, values

Communicationnetworks

Informal roles

Informal power

OperationalCapacity

Source: Michael Tushman and Charles OReilly, Winning Through Innovation(Cambridge, MA;

Harvard Business School Publishing, 1998)

The Organizational Congruence Model


15/16


P

UBLIC

VALUE

LEGITIMACY

AND

SUPPORT

PERFORMANCEFORMAL ORGANIZATION:

Exertion of authority by GMover departments, but no GMsreserve fund created, budgethearings did not get GMsattention, dissipation of effort

No leverage over FMISdevelopment

Failure to mobilize Deputy GMand Chief of Staff

Department heads not activelyengaged

PEOPLE: Power threat to

department heads

Intellectual stretch,unwanted

tasks for departmentbudget officers

Power threat to sub-department heads

Not invented here fornew budget director

CRITICAL TASKS:

Required internal analysis, newways of presenting information

Tension between analytic andbudget cutback modes CULTURE: Lack of a policy entrepreneur forbudgetary reform

Considerable departmentautonomy

Fears of budget cutbacks

No expectation by depts. that

decisions would be made on themerits

GMs initiatives disappear if yououtwait them

Program Budgeting at the MBTA


16/16


Legitimacy

andSupport

Public Value,Mission

Operational

Capacity

No support fromSecretary/Chairman, but

strong pressure forbudget cuts.

No interest or supportsought from or given byMBTA Advisory Board.

Conflict of budgetcutbacks vs.

preservation of serviceand jobs had priorityover analysis of needsand investments.

Despite GMs initiation of theproject, the MBTA lacked internalcommitment and ability to doprogram budgeting.

Strategic Tensions in MBTA

Program Budgeting Initiative

lect13 budgeting

Documents