Implementthebudget 48 zbbmerits

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Unformatted text preview: ntation; Identify decision units; Prepare decision packages (an analysis of a discrete area of activity); Rank packages; Prepare budget; Implement budget. 41 Milestones in Zero Base Budgeting Stage 1 – Defining the Scope of ZBB A key initial stage is to determine whether the organisation wishes to apply zero based budgeting across the entire organisation or a defined part. Similarly will the process be a one off exercise or ongoing. 42 Stages in Zero Base Budgeting Identify decision units The key to successful zero based budgeting is to define units at the most appropriate level in the organisation for budget programming. Decision units must have: one manager who is clearly responsible for the unit and its activities; clearly defined and measurable inputs; clearly defined and measurable outputs which lend themselves to the setting of success criteria in the form of performance targets. 43 Stages in Zero Base Budgeting Prepare decision packages A decision package is: "the identification and evaluation of alternative ways of performing programme functions and activities". There are four key stages to preparing decision packages: establishing the decision units objectives; identifying alternative methods of provision e.g. mutually exclusive or incrementally based alternative; 44 Stages in Zero Base Budgeting Prepare decision packages identifying service levels, e.g. – minimum level – the zero based below which it is not possible to continue to provide the service which is normally the statutory minimum level in the public sector; – current level – the existing base; – incremental level – placed between the current and minimum levels or an improvement over the current level; preparing a package for each of the levels being considered which contains a brief justification and a request for resources. 45 Milestones in Zero Base Budgeting Ranking the decision packages The decision packages should be evaluated and ranked in order of importance. Performance measurement tools including cost/benefit analysis are clearly a very important component, but it is also appropriate to apply a level of subjectivity. 46 Milestones in Zero Base Budgeting Ranking the decision packages This is because few activities are capable of reduction to a manageable number of measures, while some ideal measures may not be practical because of difficulties in real world application, or simply because of the costs of data collection. For example, managers may believe that there would be a “feel­good” factor in taking a particular course of action. This could never be accurately quantified. 47 Stages in Zero Base Budgeting Allocating resources The ranking list then results in a priority order for the allocation of resources. The most important activities are funded, whether they are existing ones, or new. The final budget will be made up of the decision packages that have been approved for funding, reallocated into the appropriate operational units. Implement the budget 48 ZBB­Merits it is a systematic reappraisal of the base budget; it focuses attention on outputs in relation to value for money; there is involvement of managers at all levels; it creates a ‘questioning’ attitude; there is a clear definition of organisational objectives and goals; it has the ability to be adapted to changing circumstances; it enhances knowledge of inputs and outputs; it improves communication and management consensus; there is ultimately a better allocation of resources; underpins much of the thinking behind the current efficiency agenda 49 49 ZBB­Demerits it is complex and requires special skills and training; it is expensive and there is a tendency towards bureaucracy and excessive paperwork; there can be problems with performance measures and priority criteria; the specification of minimum levels of service is threatening to some managers and may be a demotivating factor; the process of identifying decision packages and determining their cost, purpose and benefits is extremely time consuming. Furthermore there can be too many decision packages to evaluate and there can often be insufficient information to enable them to be ranked; there may be uncertainty about costs and resources of alternate, untried options. 50 50 Model of Optimization The success of PPBS and ZBB was short­lived in the hands of the federal government, and their imitators at the state level did not fare much better (Lynch 1995). Nonetheless, as ideal types in a Weberian sense, these budget formats represent the belief that rationality rather th...
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This note was uploaded on 02/11/2014 for the course MANA 2028 taught by Professor Sisterennis during the Winter '12 term at Marquette.

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