Subsystems of Budget Execution

Q: What are the four subsystems?

Subsystems of Budget Execution

• Revenue Administration

• Cash Management

• Procurement

• Risk Management

Strategic Management

57.508-201

The Budget as a Policy, Planning and Information ToolMeeting 11 – April 13, 2011

Strategic Management

A strategic management system provides the broad framework that encompasses all of the processes of an entire organization operating within an agreed upon set of purposes and interdependent components

Strategic Management• Ongoing process• Integrates planning into budgeting & managing• Mission, customer & issue focused• Emphasizes decentralization & shared vision• Translates goals into action• Efficiently uses all resources• Makes the tough choices• Evaluates performance & results• Long range view oriented on the future

Strategic Agenda

• Pursuing continuous improvement

• Cutting “red tape”

• Seeing citizens / clients as customers

• Putting customers’ needs before process

• Empowering employees to get results

• Targeting quality & efficiency

• Getting back to essential services

• Evaluating results via customer feedback

Strategic Management

“Strategic management is not a clean, step by step process. It is not linear, but a messy, iterative process that requires hard work and dedication from most people in the organization to move it toward the future. It represents a new focus for the organization; a focus on a compelling vision of the future.”

Denise Lindsey Wells

Strategic Management for Senior Leaders

Strategic Management

Six Tasks

1. Defining the mission & forming the vision

2. Setting measurable objectives

3. Outlining the strategy to meet the objectives

4. Executing the strategy

5. Evaluating performance

6. Regularly implementing course corrections

Mission Statement

A mission statement should answer these questions:

1. What does your organization / program do?

2. For whom?

3. Why?

4. How?

Goals vs. Objectives

Mission:

In partnership with the diverse communities we serve, the Health Department strives to assure, promote, and protect the health of the people of Lowell County.

Goals:• Maintain or decrease levels of reportable diseases• Contribute to a reduction in incidence and impact of disease• Improve access to health services for underserved residents• Contribute to a reduction in the teen pregnancy rate• Decrease substance abuse and its impact on families• Improve the percentage of babies born healthy

Goals vs. Objectives

SMART

• Specific – Action oriented and easily understood

• Measurable – Quantifiable and verifiable

• Attainable – Challenging but realistic

• Results Oriented – Focused on outcomes not methods

• Time Bound – Reasonable yet aggressive time frame

Strategic Management

Goal-directed decisions and actions in which capabilities and resources are matched with the opportunities and threats in the environment

What’s So Strategic?

• A shift in focus from the inputs that are used to run the organization to the outputs and outcomes the organization desires to achieve

• A focus on optimizing organizational performance and process quality as keys to delivering quality services

• An organizational culture that adapts more easily to change

• Longer range thinking about the present and the future

Strategic Components

• Written strategic plan• Organizational relationships defined• Inputs and outputs specified• Operational plan• Resource plan (program / performance budget)

Strategic Planning

Strategic Planning

• SWOT Analysis & Visioning– Where your organization is– Where you want to take the organization– Goals and objectives

• Operational Plan of Execution– How you intend to get there– Action steps– Program budget

STEP Analysis

A scan of the external environment in which the organization operates in terms of these factors:

• Social• Technological• Economic• Political

FrameworkSet Goals to Guide Decision Making

• Assess community needs, priorities, challenges and opportunities

• Identify opportunities and challenges for services & assets

• Develop and disseminate broad goals

Develop Approaches to Achieve Goals

• Develop financial policies

• Develop programmatic, operating and capital plans

• Develop programs & services consistent with policies and plans

• Develop management strategies

Framework

Develop Budgets Consistent with Approaches

• Develop a process for preparing and adopting a budget

• Develop and evaluate financial options

• Make choices necessary to adopt a budget

Assess Performance & Make Adjustments

• Monitor, measure, and assess performance

• Make adjustments as needed

Three Kinds of Objectives

• Performance– Targets for efficiency and effectiveness

• Financial– Targets for resources

• Strategic– Targets to strengthen overall position

Crafting the Strategy

• Objectives are measurable results• Strategy is how to achieve these results

Overall strategy is a blend of intended actions as well as responsiveness to unanticipated developments

within the core values

Executing the Strategic Plan

• Strategy Implementation– Realistic objectives with appropriate actions

• Control and Evaluation– Continuous assessment and adjustment

Strategy Implementation

• Organizing

• Communicating

• Culture building

• Motivating

• Budgeting

• Supervising

• Leading

Control and Evaluation

Result or OutcomeCondition of improvement or well-being for client population

Indicator or BenchmarkStandard which helps quantify the achievement of a result

Performance MeasureMeasure of how well a program or service system is working

Performance Measures

• Public Works:– X miles of streets cleaned per Y dollars– X tons of waste collected per Y dollars

• Libraries– X number of books circulated per Y dollars– X number of reference questions answered

• Police? Planning? Finance? Education?

Communicating the Vision

Communication, Communication, Communication

• Challenges and motivates workforce

• Arouses strong sense of organizational purpose

• Induces employee buy-in

• Galvanizes people to the organization

Why Shared Vision Matters

When all employees understand and are committed to the organizations mission and strategic vision, both

daily execution and responses to change and adversity are greatly improved

Not a Automatic

Ten Major Pitfalls

1. Top management assumes that it can be delegated

2. Top management spends too much time on day-to-day

3. Failure to set appropriate organizational goals

4. Failure to involve staff in the planning process

5. Failure to use plans as standards for performance

6. Failure to create climate conducive to planning

7. Assuming that planning is separate from management

8. Inserting too much complexity and formality

9. Failure to integrate all departmental plans

10. Top management making too many seat-of-the-pants decisions

Strategic Management

Q: So, why do we need “strategic management”?

Why Strategic Management

For Your Organization to Succeed in the Face of:

• Increasing demands

• Severe financial constraints

• Growing complexity of public issues

• Growing pressure from the public

Why Strategic Management

For Your Employees

• Gives everyone a clearly defined role

• Makes a difference in performance levels

• Provides systematic approach to uncertainties

• Coordinates and focuses employees

Why Strategic Management

For Your Organization

• Crystallizes long-term direction

• Reduces risk of rudderless decision-making

• Conveys organizational purpose and identity

• Keeps actions of all employees on common path

• Avoids mission creep

• Helps organization prepare for the future

Strategic Management

The process by which the guiding members of an organization envision its future and put into place the necessary resources, procedures and operations to achieve that future

So What Does All This Have to Do with Budgeting?

It is the strategic plan that drives budget formulation

It allows the organization’s leaders stay on top of the priorities so they can budget the resources the organization needs to carry out its strategic agenda

So What Does All This Have to Do with Budgeting?

If the budget cannot be fully funded to meet all of the demands, it is the strategic prioritization of the objectives and action steps that guide the deployment of the limited resources

So What Does All This Have to Do with Budgeting?

Sometimes the availability of additional resources is not always readily apparent, but strategic management can make them more visible

When the organization establishes what is really important, it also makes explicit those actions that are not as important… Eliminating low priorities and redundancies in assignments can free up additional resources making them available for strategic actions

Budgets: More Than Numbers

Improved Performance &

Results Accountabilitythrough

Strategic Management

Regionalization of Services

Strategic Management System

Q: So, what’s a strategic management system?

Strategic Management System

A management system that links strategic planning and decision making to the day-to-day business of operational management

More Than Just a Plan

Strategic management goes beyond the development of a strategic plan to the deployment and implementation of the plan and the evaluation of its results

Deployment involves communicating the plan to all employees and getting their buy-in

Implementation involves adequately resourcing the plan, putting it into action, and managing those actions

Evaluation consists of tracking implementation actions, assessing how the organization is changing as a result of those actions and using that information to update the plan

Role of Senior Management

Since strategic management is a continuous process senior leaders must be facilitators, consensus-builders, coaches, consultants, and champions of their organization’s culture

And they must be constantly in tune with their environments to change their organization as necessary

The Difference?• Focus shifts from the inputs that are used to run the

organization to the desired outcomes

• Optimizing organizational performance and service quality within limited resources is the priority

• Actions based on a plan (not a reaction)

• Organization-wide communication and involvement

• The organization can adapt more easily to change

• The organizational boundaries are more flexible

First Step: The Plan

WARNING: Do not bother to go through a strategic planning exercise unless and until the leadership team is committed to carrying it out. If there is no follow-through, confusion will arise at the operational level, and it will result in cynicism about any improvement efforts.

Keys to Success… or Failure• Assign roles and responsibilities

• Establish priorities

• Involve mid-level managementas active participants

• Think through how to manage implementation

• Charge mid-level managementwith aligning action plans

• Make careful choices aboutthe form and content of the plan

• No accountability for deployment

• Too many goals, strategies, orobjectives with no priorities

• Plan in a vacuum

• No overall strategy to implement

• Make no attempt to link withday-to-day operations

• Not being thorough - glossingover the details

Who Does What?• Senior leadership

• Reaches consensus on strategic plan• Develops deployment and implementation methods

• Planning team members• Development of strategies from goals and objectives• Incorporates feedback from organization input

• Program managers• Shares plan with employees• Collects feedback

• Resource managers• HR, budget, etc., incorporate plan needs

Problem Areas

Caution: Strategic planning is about change that leads the organization toward a better future; therefore, don’t ask for feedback on the plan by sending it out asking for comments

Advice: To foster ownership of the plan, develop a feedback process that actively involves line managers and staff

Problem Areas

Caution: The more strategic the plan, the harder it is to ensure that the workforce feels it is contributing directly to the organization’s mission

Advice: It is crucial to make the plan a living document so start by using routine organizational terms and by continually asking how daily work relates to the plan

Problem Areas

Caution: During deployment, it is important for the program managers to continue to focus on the good of the whole organization, not just their own functional areas

Advice: Encourage open and candid communication among all program managers so that issues are brought out and dealt with constructively during planning phases

Problem Areas

Caution: Sometimes the resources or skills needed to accomplish an objective are not available and sometimes more study is needed

Advice: The first step may be to put together a team to conduct additional study. The results of the study effort will determine what changes have to be made in staffing or other resources before the action steps can be implemented

Problem Areas

Caution: Be careful not to frontload or overload the strategic plan’s objectives

Advice: The plan may take 5 years or more to fully implement so no need to begin all of the objectives in the first year… there are never enough resources to do that, and it is important not to neglect the organization’s current mission-sustaining work

Problem Areas

Caution: Union membership participation may not ensure the buy-in of union leadership.

Advice: Union leaders can participate in the process by providing feedback on the plan along with the mid-level managers, and be sure that they understand the benefit to the organization as a whole and to their membership

Problem Areas

Caution: Some employees may have difficulty understanding the need for action in a plan that only describes the organization’s mission, goals and objectives

Advice: Include detail on the action steps so that the staff will be able to see how the work will get done, and use a format that is flexible enough to allow for regular updates

Keys to Success… or Failure

• Assign roles and responsibilities

• Communicate the plan constantly and consistently

• Recognize the difficulties associated with change

• Help people through the change process

• No accountability

• Never talk about the plan

• Ignore the emotional impact of change

• Focus only on accomplishments

Problem Areas

Caution: If the organization had a previous negative experience with strategic planning or employees have little inherent faith in the concept of strategic planning or management’s commitment to it, cynicism will result

Advice: The communication of the strategic plan should be handled as a special event to mark a new beginning and a focus on the future… and clearly demonstrate to employees that this plan is real and will be implemented

Problem Areas

Caution: If the leaders of the organization do not behave in accordance with the plan’s principles, then the rest of the staff will lose respect for their commitment to change

Advice: The behavioral aspects necessary to achieve the vision must be demonstrated daily… live the principles… be a good role model every day

Problem Areas

Caution: When evaluating how your organization is doing, be sure that the measures are the right ones. Some measures may be too aggregated to show change even if there was progress made. But, if little or no progress is made, maybe the measures are fine, but the strategies may be incorrect. Or staff may not be executing properly…

Advice: Always collect several data points over a period of time before drawing conclusions. Before action is taken, investigate what’s behind the data.

Measurement

• People at appropriate levels need to be involved in developing the measurement tools

• A variety of measures is necessary to adequately describe the organization and its processes

• You need to measure over time show to show trends• Analysis is required to determine the causes of success

or failure• Measure only what is important• Don’t collect data that you are not going to use

Performance Measurement

Q: What is performance measurement?

Performance Measurement

A: It is a process through which an organization assesses how well its programs and services are achieving their desired results

The process must include both the organizational performance data and a benchmark that creates framework for analyzing that data

Organizational Performance

The work of an organization’s assets, employees and equipment in converting inputs into outputs and outcomes

and

The quality of the resulting outputs and outcomes

Uses for Performance Measurement

• To identify areas that have not resulted in positive results

• To identify trends in service needs and delivery

• To delve further into the nature of particular problems

• To set targets for the future

• To motivate staff to improve performance

• To hold managers and staff accountable

• To develop and improve programs and policies.

• To help develop programs and budgets

Outputs / Effects

Your Final Presentations

When Finished = Productivity

Solid Content & Graphics = Quality

Interesting = Customer Satisfaction

Influential = Impact

Why Performance Measurement?

Q: How many of the 8 reason can you name?

Why Performance Measurement?

1. To Budget & adequately and appropriately allocate resources

2. To Evaluate how well is public agency performing.

3. To Control to ensure employees are doing the right thing

4. To Motivate and provide periodic sense of accomplishment

5. To Celebrate accomplishments

6. To Promote the organization and its employees

7. To Learn reasons behind both good & bad performance

8. To Improve and develop processes and approaches

Why Performance Measurement?

If you don’t measure …

• How do you know what or where to improve?

• How do you know where to allocate money and people?

• How do you know how you compare with others?

• How do you know whether you are improving or declining?

• How do you know whether or which programs, methods, or employees are producing results supporting your strategic action plan?

Why Not Just Use…

• Managers’ Intuition?• Hunches?• Rumor?• Tradition?• Habits?• Rules of Thumb?• Guesses?• Anecdotes?

Relation to Strategic Management

Measurement Categories

1. Effectiveness

2. Efficiency

3. Quality

4. Timeliness

5. Productivity

• Safety, Access, Equity, Impact…

(TBD by the Organization)

Measure All Meaningful Work • Desired performance outcomes must be established for all

meaningful work• Work that is not measured is deemed worthless regardless of

its outcomes• Work that is not measured cannot be managed because there is

no objective information to determine its value • Outcomes provide the basis for establishing accountability for

results rather than just requiring a minimum level of effort• Desired outcomes are necessary for proper work evaluation

and legitimate performance appraisal• Frequent reporting enables timely corrective action which is

needed for effective management and organizational success

Useless Performance Measures

• Does not provide good information – The measure is not valid, reliable, responsive... exactly what is being measured and how the results should be interpreted are not clear

• Does not illustrate progress toward achieving goals and objectives – The measure is not responsive and/or functional

• Does not have ownership – The measure is not functional, credible, and/or understandable and no one is responsible for this performance

• Will never have data available – The measure is not available… it would be either nearly impossible or cost-prohibitive to collect the necessary data

Measurement Data Issues

• Collecting not enough data

• Collecting too much data

• Collecting the wrong data

• Heavy reliance on summary data

• Emphasizing averages and discounts outliers

• Heavy reliance on historical patterns

• Heavy reliance on gross aggregates

• Heavy reliance on static (snapshot) analysis

• Little attention to time-based or value-added measures

Attributes of Best Measurement Data

• A way to measure exists

• May be interpreted easily and uniformly

• Provide an agreed upon basis for decision making

• Are understandable by everyone

• Are precise in interpreting the results

• Apply broadly and comparably

• Are economical to apply

• Reflects the customer’s and organization’s needs

Positive not Punitive

“Performance measurement systems should be positive, not punitive. The most successful performance measurement systems are not ‘gotcha’ systems, but learning systems that help the organization identify what works.”

National Partnership for Reinventing Government