INTRODUCTION
Three items converged recently which reinforces my determination to better explain an idea for an alternative approach to our budget building methodology.
A. I believe we are currently having challenges producing a true "balanced budget" as though we have a mathematical equation that included something entirely impossible to solve such as trying to divide by zero.
After 3 consecutive years of ‘salami slicing’ (5%, 5%, and 3%) budgets, any reserves that might present themselves (to save the day) may no longer exist. There may be no more proverbial rabbits to pull out of the hat.
As if to give credence to one of Einstein’s sayings about repeatedly doing the same thing over and over while expecting different results, trying to come up with a Balanced Budget may have many wondering about the sanity of it all.
B. One Commissioner this week seemed to identify a condition that if existing, would prompt seeking an alternative means to build a budget. It appears that Queens Anne County may be having such financial constraints, they may need to have lay-offs (an underlining indicator that would encourage that Commissioner to seek an alternative approach).
It would seem that rather than waiting to face an impending lay-off scenario, we collectively use our own foresight to see that we need to explore taking a different approach. Because the U.S. economy is not like this county has experienced by the present day generation, an open mind to taking a different approach would seem prudent.
Calvert County has led the State of Maryland on many efforts. Land use planning, educational excellence, and our overall Quality of Life to mention just a few are reasons to be proud. Surely, we cannot be afraid to lead into a new direction to stay ahead of potential financial crises, and lead a new course, direction, and future.
C. The State of Maryland is definitely passing on the teachers’ pensions as well as strict new Maintenance of Effort burdens to the counties. Though final dollar figures are not 100% determined, even a best case scenario where the state provides some offsets is likely to be short-lived (one year). How our board addresses this challenge, while pinched from other sides such as the teachers lobbying for more funding for their salaries, wants and desires of public safety officials, as well as the general operation of the county government begs for us to take a different approach.
STATUS QUO
There is much positive to say about the previous approaches to the budget build for this county. Recognizing that anyone who identifies a need for change has the burden of making the case for change, I want to assure everyone that I do not advocate simply throwing out all that is currently done. Current best practices would be incorporated into any new method we construct to build the budget. One bottom line, however, we must recognize the reality that given the financial situation of the U.S. economy, the status quo (the way we’ve always done it) can no longer continue. Our citizens deserve better, and this board is uniquely capable of providing better.
WHAT THIS DISCUSSION IS NOT
This discussion is not about how to bring the FY13 (current build) into balance in time for the beginning of the fiscal year that starts 1 July 2012. Nor is this discussion about the FY14 Budget Build whose build cycle starts 1 July 2012.
WHAT THIS DISCUSSION IS
This discussion is focused upon the budget build cycle that begins 1 July 2013, for the FY15 budget.
This discussion is a framework. Much like a carpenter constructs the framework of a building, this framework outlines the major components and suggests a schedule for completing (putting substance on the framework) the budget. Over the past year, I’ve made mention of various approaches, tools, and concepts. While some of these may sound new, I assure you they are proven to work and have demonstrated success in other places. This framework works for contracts that are relatively small ($25 million), national, state, and local governments, as well as fortune 500 companies.
FRAMEWORK
This framework uses an iterative building process that begins with the basics. Like a step ladder, it takes two rails that connect the various steps. One rail represents Time. The other is a Feedback Loop. Each step is described. Each step includes a feedback loop to permit any needed adjustments as one proceeds along the steps. During this build process, several by-products are inherently produced. They emerge naturally and become useful elsewhere.
Since the resulting Budget, Organization Structure, and Customer/Citizen Interaction will all emerge from the common Basics build approach, we will gain cost efficiencies, commonality of understanding, and convenience for the citizens (apologies for the fuzzy image).
Three items converged recently which reinforces my determination to better explain an idea for an alternative approach to our budget building methodology.
A. I believe we are currently having challenges producing a true "balanced budget" as though we have a mathematical equation that included something entirely impossible to solve such as trying to divide by zero.
After 3 consecutive years of ‘salami slicing’ (5%, 5%, and 3%) budgets, any reserves that might present themselves (to save the day) may no longer exist. There may be no more proverbial rabbits to pull out of the hat.
As if to give credence to one of Einstein’s sayings about repeatedly doing the same thing over and over while expecting different results, trying to come up with a Balanced Budget may have many wondering about the sanity of it all.
B. One Commissioner this week seemed to identify a condition that if existing, would prompt seeking an alternative means to build a budget. It appears that Queens Anne County may be having such financial constraints, they may need to have lay-offs (an underlining indicator that would encourage that Commissioner to seek an alternative approach).
It would seem that rather than waiting to face an impending lay-off scenario, we collectively use our own foresight to see that we need to explore taking a different approach. Because the U.S. economy is not like this county has experienced by the present day generation, an open mind to taking a different approach would seem prudent.
Calvert County has led the State of Maryland on many efforts. Land use planning, educational excellence, and our overall Quality of Life to mention just a few are reasons to be proud. Surely, we cannot be afraid to lead into a new direction to stay ahead of potential financial crises, and lead a new course, direction, and future.
C. The State of Maryland is definitely passing on the teachers’ pensions as well as strict new Maintenance of Effort burdens to the counties. Though final dollar figures are not 100% determined, even a best case scenario where the state provides some offsets is likely to be short-lived (one year). How our board addresses this challenge, while pinched from other sides such as the teachers lobbying for more funding for their salaries, wants and desires of public safety officials, as well as the general operation of the county government begs for us to take a different approach.
STATUS QUO
There is much positive to say about the previous approaches to the budget build for this county. Recognizing that anyone who identifies a need for change has the burden of making the case for change, I want to assure everyone that I do not advocate simply throwing out all that is currently done. Current best practices would be incorporated into any new method we construct to build the budget. One bottom line, however, we must recognize the reality that given the financial situation of the U.S. economy, the status quo (the way we’ve always done it) can no longer continue. Our citizens deserve better, and this board is uniquely capable of providing better.
WHAT THIS DISCUSSION IS NOT
This discussion is not about how to bring the FY13 (current build) into balance in time for the beginning of the fiscal year that starts 1 July 2012. Nor is this discussion about the FY14 Budget Build whose build cycle starts 1 July 2012.
WHAT THIS DISCUSSION IS
This discussion is focused upon the budget build cycle that begins 1 July 2013, for the FY15 budget.
This discussion is a framework. Much like a carpenter constructs the framework of a building, this framework outlines the major components and suggests a schedule for completing (putting substance on the framework) the budget. Over the past year, I’ve made mention of various approaches, tools, and concepts. While some of these may sound new, I assure you they are proven to work and have demonstrated success in other places. This framework works for contracts that are relatively small ($25 million), national, state, and local governments, as well as fortune 500 companies.
FRAMEWORK
This framework uses an iterative building process that begins with the basics. Like a step ladder, it takes two rails that connect the various steps. One rail represents Time. The other is a Feedback Loop. Each step is described. Each step includes a feedback loop to permit any needed adjustments as one proceeds along the steps. During this build process, several by-products are inherently produced. They emerge naturally and become useful elsewhere.
Since the resulting Budget, Organization Structure, and Customer/Citizen Interaction will all emerge from the common Basics build approach, we will gain cost efficiencies, commonality of understanding, and convenience for the citizens (apologies for the fuzzy image).
There are more by-products. These are the Big 3.
HOW TO START
Each of the following steps follows a progression that is logical, understandable, and overtime predictable. After the ‘first pass’ (through the first fiscal year), the by-products will serve as tools which easily can be tweaked over time without needing to completely re-invent and do over. The continuous feed-back loop allows us to quickly and easily make adjustments that are priority driven and represent a continuous process improvement. The following times are estimates constrained by the number of months to implement this framework to begin planning for the start of the FY15 Budget Build (1 July 2013).
STEP 1—CUSTOMER and CITZEN NEEDS
Everything begins with the Customer first. For purposes of discussion, I’ll differentiate the needs as being either external needs (citizens), or internal needs (customers). Not to get hung-up on words, while citizens can be customers and vice versa, we will find that while the county government serves the citizens (as external customers who have citizen needs), the county government also serves those who are employed by the government (internal customer needs). For example, Budget and Finance has activities that serve both external and internal customer needs (i.e., water/sewer bills – external and paychecks – internal).
In Step 1, we need to have the staff document all needs. Given we Commissioners interact with citizens routinely, we should be expected to a help identify those needs. All needs should be documented, categorized as appropriate (not limited to internal or external), crafted into discreet increments and prioritized. Hint about prioritization – All who have a need have as their highest priority their need.
Key words to consider when putting together the “Needs” listing include Requirements, Statute, Constraints, Demands, Inputs, Needs, Requests, Tasks, Orders, and Questions.
It is critical that within Step 1, a “relative prioritization” effort occur. Anticipate that departments will have their own prioritizations. Intra- and Inter- prioritizations needs to occur with adjustments made interactively.
“I betcha these are well known, but simply not yet documented in a repository”
Estimated time for Step 1 --- 3 weeks no more than 4
STEP 2 – SATISFYING THE NEEDS
Step 2 is where the various departments begin describing how they receive and address the needs presented to them. It is the reason they go to work every day. But, to break it down easily, we need to have the information captured in a manner that it can serve multiple purposes (Activities yield Processes which produce Functions and Services). These are key concepts and are presented below:
An activity is the basic unit, and when tied to other activities form a Process. Each Process can be characterized as a Function and a Service. I’ve attached a visual (sorry if the image is fuzzy, I don't know how yet to improve it. Can send you a clean copy if you ask).
During Step 2, we need to also associate the Activities, Processes, Functions and Services to the Needs identified within Step 1. Iterative changes to the earlier created Needs should be anticipated during this step. Most likely new and previously unknown needs will emerge. Several iterations within this step are likely as needs are prioritized and reprioritized.
Estimated time for Step 2 --- 6 weeks no more than 8
STEP 3 – LOGICAL GROUPINGS
Step 3 is where we take the gathered data and perform basis analysis to determine logical groupings. These groupings are formed around common functions and common services. Doing such can yield the creation of functional organizations, time-based organizations, process oriented organizations, or whatever is determined to be in the best interest of the entire organization.
This is the point where it becomes apparent that “Form Follows Function”. The form (organizational structure) is created around the understanding of the functions.
Step 3 includes de-conflicting duplicate functions and services as well as beginning the effort to identify personnel gaps and overlaps.
The beginnings of another by-product begins to take form here, as the organization is accumulating sufficient information to create a “Frequently Asked Question” feature for its web page as well as formation of responses that point the questioner to organizations, services, and tangible responses.
Estimated time for Step 3 --- 8 weeks no more than 12
STEP 4 – BASIS OF ESTIMATES
Step 4 begins the bridge from the “operational” to the “financial”. The primary task at hand during this step is to determine the resources required to perform the Services and Functions that are needed to satisfy the Needs. A Basis of Estimate is the documentation that requires the line manager to identify the types of skills needed, level of skills needed, and number of employees needed to successfully carry out the organization mission that was created/identified within Step 3.
Most critical during Step 4 is the dynamics of the Trade Space. This is the area where negotiation between the needs for resources and suppliers of resources occurs. Various guiding documentation is needed during this step to include Standard Operating Procedures (or validation they exist and are used), adherence to Standards (wide ranges of constraints that must be met or obstacles to overcome) is demonstrated, and Cost Realism is employed. This Trade Space appears to already occur to some degree with the current process (between the months of July – December).
The Basis of Estimates need close coordination with Personnel, Finance, and Supervisory Chain of Command. Following a successful Basis of Estimate for an organization, a primary question of “How do I know how many people are needed?” can be answered.
With knowledge of employee manning strength, estimates can become clearer for determining how much equipment and physical resources are needed. Following successful Basis of Estimates for an organization, a secondary question of “How do I know how much equipment and physical resources are needed?”
Finally, with the summation of the knowledge gained from the Basis of Estimates pertaining to Personnel costs, physical resource costs, and other costs, an overarching question of “How do I know how much money is needed by the county government?”
Estimate time for Step 4 – 5 months
This image is our current budget build process (in another posting, this image is actually clearer -- Go Figure):
It would seem that Steps 1 – 3 represents what’s new with the proposed change to the budget build whereas Step 4 may modulate slightly the current activities that occur with the commencement of the budget build. Backing up the time estimates used for Steps 1 – 3 (total of 6 months) yields a start date using this Framework must begin no later than January 2013 to align Step 4 with the current approach for the build of FY15.
The bottom line difference is that rather than beginning the budget build based upon what was done last year and trying to match up with projected revenue (current approach), the start of the budget build will have a fully fleshed out new organization, basis of estimates that are current, and a repository for interaction with the citizens; and with a means of interactively prioritizing to a greater degree than currently possible. Most of what is described here can be done in front of the public thereby providing more Transparency (better insight for them).
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