NEW JERSEY STATE LIBRARYTRUSTEES INSTITUTE

MAY 9,2009PAM ROLLO

Budgeting For Knowledge

What Is the Budget?

Plans defined in financial termsEvaluation toolThe 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…

PoliticalCompetitivePhilosophical

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 actionProvide a framework for evaluation,

performance and improving budget planningBe participatoryNot be used to deny opportunityBe 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 weaknessPeople are fearful of not doing it properly and hampering the institution

Why Budget?

Gain controlEnhance productivityGain knowledge about the organization

Align with the strategic planReveal the expertise of the organization

Strategy and the Budget

MissionVisionBudget is the monetary expression of the strategic plan

Budgets follow strategy, Strategy doesn’t follow budgets

Budgets and Funding

StateMunicipalityFriends of the LibrarySpecial fundraising for unique efforts

How do Trustees Help?

Understand the Library’s financial needsCollaborate with the Library Director and become

knowledgeable about the Library’s goalsBe aware of the Library’s previous financial

performance Have knowledge about the Library’s opportunities

for local, state and federal fundingBecome knowledgeable of supplemental sources of

revenuesUnderstand the basics of legal and reporting

requirements for funding

Budgets Measure and Reveal

Examine costsInvestigate processesExplore new opportunitiesTest 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 influenceFear that the they will be judged against

unfair standardsConfused by what system to useConfused 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 descriptionsClear understanding of what the library currently

does for whom and with whomClear understanding of current staff capabilityFacility planning ( cost per square foot full

loaded)Square Footage devoted to collection, people and

programs

Budget Influences

The Economy

Library Objective

s

Community Needs

Customer

Demands

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 surveysPrint surveysSummits and forumsTrial programsWEB 2.0 - Social networking toolsTouching non-membersSoliciting input from community thought

leaders

Prioritize Your Services and Activities?

Do you have sacred cows?

Benchmarking and Measuring

Competitive resourceFosters innovationSupports viabilityReveals core competenciesShould be embedded in the strategic planDefines value

Measurement Models

PLA standards http://www.ala.org/ala/mgrps/divs/pla/

plapublications/pldsstatreport/index.cfm

Comparative library performancehttp://nces.ed.gov/surveys/libraries/

librarysearch/http://harvester.census.gov/imls/publib.asp

Compare to other community services

Balanced ScorecardRobert Kaplan and David Norton

Qualitative and quantitativeConcentrates on customer satisfactionProvides 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 Scorecardillustration 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 indicatorsDetermining what success looks likePutting the plan on the calendarLinking the KPI to the budgethttp://www.balancedscorecard.org/

Budget Techniques

Line item or percentage budgetFormula budgetPerformance budgetingManagement by objectiveZero based budget

Budget Types

Formula budgetFunction budgetProgram budgetPPBS (planning, programming, budgeting

system)MBO (management by objective)Zero based

Formula Budgets

MechanicalApplies to all services equallyEach service is measured against the same

criteriaFacilitates comparisons among units and year

to year comparisonsReduces paperwork Eliminates details

Function Budgets

Targets the task to be accomplishedBundles related costs into the complete cost

of performing the process

PPBS

Overlooks the current base and concentrates on future activities

Combines budgeting and planningExpects a scenario of alternatives with an

accompanying cost of analysis Measures scenarios against performanceClarifies 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 activitiesDetermines the point at which programs can

not be supportedCreates 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 goalsLists and links the activities necessary to meeting

those goals – high tacticsAnalyzes the activities in a step by step progressionCosts the activitiesLinks the activities to the calendarEncourages participatory managementProvides motivational benefits

Benefits to MBO

Motivates the teamStrengthens relationshipsProvides a framework for coachingEliminates weak appraisalsProvides knowledge of what is expectedIncreases satisfaction

Activity Based Budgeting

Shifts from detailed plans to trend analysis and rolling forecasts

Takes into consideration the real financial position

Based on performancePerformance is documented by KPIs Monitored by flashes against rolling forecasts

Ramifications of Activity Based

Goals are met in “real time”Act while resources are availableConsistent execution planEffective use of investment – clear linking of

tactics to successLink service to expectations of users

Remember when Preparing

Know your audienceAvoid surprisesQuantify, quantify, quantifyConcise and polishStories Count – Use modern toolsAmple supporting documentation Rehearse those answers

Success is Measured

How happy are the clientsDoes something new and remarkable happenWorks better than the competitionWorks as well or better than other librariesMeets and sticks to the planFlexibly meets new challenges

Other Places of Inspiration

http://www.oclc.org/us/en/par/default.htmOnline Computer Library Centerhttp://www.urbanlibraries.org/Urban Libraries Council