Performance-based budgeting or budgeting for outcomes (BFO) has taken center stage and not in the best light. Earlier this summer, the Department of Veterans Affairs (VA) introduced the world to BFO — the idea of linking spending to performance — and showed how unrealistic goals, inadequately managed performance measurement systems and improperly used, inaccurate data can have unforeseen, irreparable consequences.
What the public didn’t see, however, is how a properly run budgeting for outcomes system, such as the award winning one currently running in Park City, Utah, can greatly improve how an organization’s budget is prepared, managed and executed, saving time, money and increasing overall efficiency.
In this post, we will clear the air and reveal the top five ‘do’s and ‘don’t’s of a properly run budgeting for outcomes system.
- DON’T set unrealistic goals. Establishing a concrete number of patients each VA hospital physician was required to see set the entire VA scandal in motion. Having unreasonable expectations will put the entire budgeting for outcomes system on its heels, allocating resources to chase goals that simply can not be caught.
- DO encourage communication and collaboration. With busy schedules and competing demands, it can be hard to gather department heads on a regular basis to discuss organization-wide initiatives. For this reason, having a unified system where stakeholders can review proposals, collaborate on ideas and contribute feedback on their own time is ideal for a properly run budgeting for outcomes system and necessary for accurate data with one version of truth.
- DO stay on top of data. One of the core tenants of the BFO process and the key to its success is the linking of budgets at the most granular level to well-defined, specific performance measures. By seeing the impact every dollar has across an organization, you can adjust where your money is being spent. Properly producing and managing data is vital to linking budgets to outcomes.
- DON’T abandon the process. An unmanaged or unmonitored system can lead to botched (unintentionally or otherwise) data input and increased time and effort to make budget adjustments, resulting in delayed, untimely decisions. By using a system that can produce real-time data, generate on-demand reports, and quickly reallocate resources, organizations will be able to properly manage even the most complex budgeting for outcomes processes.
- DO make it custom. While the budgeting for outcomes process can be applied to almost every organization, regardless of industry or size, there is no single model of budgeting for outcomes that works for every organization. To be effective, budgeting for outcomes should be tailored to every organization’s needs, incorporating unique processes with industry-specific best practices and the core tenets of BFO.
When properly implemented, Budgeting for Outcomes can work wonders on an organization’s budgeting process, but as the VA taught us, applying the principles of BFO is no longer enough. The best way to execute a budgeting for outcomes system is with a solution that encourages collaboration across departments, offers real-time data and budget updates and is easy to use and manage.
To learn more about Budgeting for Outcomes and see additional challenges and recommended solutions, click here.