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We’re the Federales. We Don’t Need No Stinkin’ Budget.

By Scott Lazenby

budget 2In previous columns we discussed ways to adapt governmental budget systems to modern management principles of delegation, empowerment and alignment of organizational goals. Responsibility for managing financial resources (both revenues and expenditures) should be pushed to the level of the organization closest to the actual provision of service (to the “lowest” possible level in a hierarchical view of organizations). But is this really necessary or desirable in large bureaucracies that perform routine services?

Consider a typical state Department of Motor Vehicles (DMV) office. Most of the administrative decisions for the office are made centrally: land and office space leases, development of software and maintenance of the computers system, purchase of standard forms and driver manuals, negotiation of union contracts and establishment of salary scales and even hiring. Prices of services (license fees) are set centrally, often by the legislature. The local office manager acts as the day-to-day supervisor of the office staff and may participate in hiring decisions, but otherwise has little influence over operating costs or revenues. These individuals need not have much training or skill in financial management or even efficiency improvement. Is there any reason to delegate financial authority to them?

There is no point in giving individuals responsibility for a budget when the organization prevents them from making decisions that affect the budget. In this case, the key operational decisions are made elsewhere in the organization, typically in the regional or state central offices that manage a series of individual DMV branch offices. It is at that level that delegated budgeting practices should apply and not at the individual branch office level.

The same situation applies to road crews, where the crew leader is a front-line supervisor but doesn’t have much authority over other expenses; or firefighter shifts supervised by a battalion chief; mail carriers supervised by the local postmaster or college professors supervised by a department chair. These front-line supervisors typically have little control over decisions that affect the budget. In the private sector, the same is true of large banks. The vice president who manages the local branch usually has very little control over office lease costs, the choice of Internet service provider or even advertising.

A separate management question is this: should operational decisions be allowed to be made closer to the actual point of service delivery? If DMV or post offices are models of efficiency and citizen service, then the current level of operating control is appropriate. If not, then one strategy might be to empower the front line supervisor and his or her staff with more responsibility and authority over operating decisions that do affect the budget. Much of the recent research on quality and performance improvement suggests that this is a good idea.

Arguments for doing so include financial ones. Some examples:

  • An operating manager wondered why office paper procured by the central purchasing office cost significantly more than the paper sold to the general public by the warehouse store.
  • A librarian discovered he could buy hardcover bestsellers cheaper at Costco than those obtained by the purchasing office.
  • The forest supervisor knew she could save $18,000 per year in Internet costs by using the local municipal ISP, but the GSA insisted on using the regional phone monopoly.

For governments (and corporate bureaucracies), one of the greatest barriers to giving front line units more autonomy is the insistence on uniform levels of service. The weak link principle means, in practice, that this is uniformly mediocre service. If the residents of Shelbyville get particularly excellent service from their DMV office, the residents of Springfield might protest if they don’t get the same. They won’t protest, however, if Shelbyville’s service is just as dismal as theirs. There probably isn’t a simple solution to this problem. As H.L. Mencken said, “Democracy is the theory that the common people know what they want, and deserve to get it good and hard.”

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