INLS 131:  Management for Information Professionals

Week 8: February 26 - March 4, 2002
The Managerial Control Function;
Budgeting

Background

One aspect of management is coordinating. In the coordinator role, the manager's task is to assure that work flows smoothly and that activities are carried out in order of importance with minimum conflict among individuals or work groups.

Since the manager's job involves getting work done through others, the manager must see that people are in the right place at the right time to perform the right task. Managers must assure that folks have the necessary space, materials, and equipment to do the job and that the output of one work group is available as input for the next-in-sequence work group when needed. This combination of activities requires competency in planning, organizing, and controlling.

Planning can be strategic--planning directed toward realizing a vision. Strategic planning involves setting an organization's mission and specifying long-term goals. Planning can also be tactical, that is, planning to implement the vision. Tactical planning involves developing specific (usually short-term) measurable objectives, and determining the best method to achieve each of the objectives. Planning can be very specific as well, as in operational planning. Operational planning involves providing a detailed map to get "from here to there." Operational plans often include developing standard operating procedures (SOPs) as well as performance standards for human, financial, physical, and/or technical resources.

We will consider standards for employee performance when we consider performance appraisal and job design in Week 12. Standards for physical resources may involve setting levels of service, such as acceptable down-time rates, use of project management skills, diagramming tasks, determining the "critical path," and the like. Many of these operational planning techniques involve the use of technical planning tools and are incorporated into INLS 162, Systems Analysis (or similar courses elsewhere).

Organizing involves determining how to allocate and coordinate organizational resources (including people) to accomplish goals and objectives. We will consider organizational analysis and design in Week 11.

Controlling is the third function in the planning, organizing, and controlling set. Controlling involves maintaining the continuity and stability of the organization. The manager uses control mechanisms to provide feedback to an employee to show whether he/she has met the goals set in planning. The overall monitoring activity the manager has responsibility for is also part of the controlling function.

More specifically, control is the process of determining whether actual performance is consistent with planned performance and whether the organization, the work unit, or the individual is reaching the identified goals. Control is also a process of analyzing the discrepancies between actual and planned performance to modify future plans and to better meet organizational needs. So control systems have an element of the future as well as the past and present.

Implementing and maintaining an organizational control system can be an uncomfortable and onerous task for the manager or it can be an intellectual challenge. The trick is to put a lot of effort into planning effective and efficient control systems at the outset. Four steps are important for all control systems:

1. Setting performance objectives or standards. Some agreed-upon (remember the "psychological contract") standard of performance indicating an expected and acceptable level of performance is the beginning point.
2. Measuring actual performance. Methods of measurement constitute a major field of study. For financial control, we will be concerned with measuring in ways that can be translated into monetary terms.
3. Comparing actual performance against an objective or standard. This is a key step to determine if the performance meets, exceeds, or falls short of expectation. Often there is an acceptable range of performance built into the standard. (Note: The rubric--the evaluative criteria--I provided to evaluate your case study analyses is an example of a standard with a range of acceptable performance.)
4. Taking appropriate action. When performance is outside the acceptable range, some action may be required. The manager must determine what the appropriate action will be. If the discrepancy is negative, corrective action is needed; if the discrepancy is positive (if the standard has been exceeded), the objective or standard may need to be set at a higher level.

The manager's responsibility involves identifying critical control points: what will be measured, how often, by whom. Input control systems (sometimes called "feedforward" systems) are preventive in nature and are designed to reduce possible discrepancies between actual performance and standards. Admission or hiring standards and procedures increase the probability that students or employees can do the job. A budget is a feedforward control system indicating what the organization is willing to spend in a particular area.

A concurrent control system focuses on monitoring the internal transformation process and providing small corrections as the process progresses. Regular information from a manager to an employee to let him/her know how he/she is doing with suggestions for improvement is one example of a concurrent control system. Financial analysis methods through financial statements and ratio analyses are also concurrent control systems. They focus on how money is being spent and predict what will be the outcome on the future given this information. Using financial analytical methods the manager may be able to suggest mid-course corrections.

Control systems that focus on output are referred to as feedback systems. These are used to document past performance, often as one element of future planning. Students' end-of-course evaluations provide feedback to a professor with expectations that he/she will incorporate corrective action into planning for the next time around. Annual performance reviews and raises provide feedback on past employee performance. In a financial control system, an audit is a feedback control mechanism. The audit verifies that money has been spent according to the budget (the plan) and that the financial statements are an accurate reflection of the organization's financial condition.

Assignments

You have one reading for background. It is a chapter from a book entitled Financial Planning for Libraries by Ann Prentice. You can access the reading as a pdf file: Financial Planning.

The Prentice chapter is easy to read--perhaps some of you will want to find and borrow the book to read more on the topic (if not now, perhaps later). The non-library folks in the class should not be put off by the word "libraries" in the title. Prentice's clear descriptions generalize very well to other cost-center operations.  (Note: A cost center is an organization or department where the manager is held responsible for controlling cost inputs. Two other kinds of centers include a revenue center, where the unit is expected to generate revenue or income, and a profit center, where the budget is self-contained and the manager has responsibility for both revenues and costs and is expected to make a profit.) In the chapter, pay special heed to the section on program and performance budgeting and output indicators.

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Task 17: Developing Line-Item and Program Budgets

To apply what you are learning about planning and budgeting, I will provide you with two different scenarios with exercises to be performed. You may choose the scenario that appeals to you most. Both scenarios and their accompanying exercises are available to you as pdf files as follows: Moxie International Conference Services Audiovisual and Information Support and the Pinewood Public Library.

In one scenario, the Moxie International Conference Services Audio Visual and Information Support, the organizational unit is a department of a larger organization. The description of the unit describes the purpose and services, the organizational context, and the four full-time people and three half-time people who make up the staff. You are given the budget for last year and asked to develop a budget for this year, first according to whatever you think is necessary (this is where planning enters the picture), and second, given a requirement to reduce the budget by 5 percent. You are also asked to convert the line-item budget that you will prepare to a program budget.

In the second scenario, the Pinewood Public Library, the context is a small branch library that is part of a larger regional group. You are given background information about the clientele and some of the most recent events. A description of services and the positions of the five full-time and three part-time employees is provided. You are given the budget for last year and are asked to develop a budget for this year based on need and planned service offerings. You are then asked to develop a second budget based on a 5 percent reduction from the past year. You are also asked to convert the second (reduced) line-item budget to a program budget.

Please post the results of your three exercises to the Planning and Budgeting forum. Entitle your submission for the first budget "Exercise 1 (Moxie or Pinewood) Budget," the second "Exercise 2 (Moxie or Pinewood) Budget," and the third "Exercise 3 (Moxie or Pinewood) Budget." You may do this exercise individually or team up with another person in the class and submit it jointly. If you choose a partner, make sure both names are included in your submission. If you are at all uncertain about this assignment, please let me know and I will solicit a partner for you. All three exercises are due by or before March 25.

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Week 9