Outcome based budgeting offers opportunities to uncover vital insights. Rebecca Hellard reveals her experience.
I was recently asked about my current challenges and concerns. I like to turn these into opportunities and adventures wherever possible.
Currently, I’m working with an authority covering the CFO and s151 role, alongside a great set of people all driving forward improvements across the board.
One of our key challenges is not so much balancing the budget for 2020-21—we have all been through austerity and funding cuts over a number of years, and we have more certainty on social care grants for future years—its more about developing the vital insight underpinned by “outcome based budgeting”.
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I realise that this is terminology that has been around for a good few years, but it’s difficult to find examples of councils that have set it up in-depth and in a way so that it becomes the intelligence beneath the business plan outcomes.
If you are in the fortunate position that I find myself in with the implementation of a new ERP system, then I am sure that you are grabbing this opportunity, as I am, to get the ledger set up to address outcome based budgeting whilst still retaining cost centre budgeting.
Mapping
The key difficulty I have found, and continue to find, is that an organisation needs to be set up to be managed by outcomes and be able to map how each service links to each outcome.
This sounds straightforward, but when an organisation starts to make this shift it is both a management and a cultural move. Without this, it’s purely a technical and reporting exercise that, in reality, won’t deliver the focus on performance where it really matters.
Most corporate business plans now have clear outcomes in them, but not many can drill down into objectives that can be quantified in any depth. That then breaks the vital golden thread down to service contributions or, indeed, team and individual appraisal objectives.
We work in a complex world where it is rare for an outcome to be delivered solely by any one service. Often as not, more than one organisation is substantially involved in delivery of a single outcome. This makes it really complex to achieve outcome based management, let alone outcome based budgeting.
However, outcome based budgeting also highlights a mismatch, between service delivery and delivery of outcomes, and silo working between services. Spotting this allowed for redirection of effort and more effective delivery. It is absolutely vital to measure impact on the areas that matter.
ERP
Implementing a new ERP is such a huge opportunity. You can set up the chart of accounts exactly as you wish so much easier than having to reshape an existing set
It also signals a new approach, start of a new era; an opportunity to reset. The new ERP systems are much more intuitive, with much more reporting capability which gives much better intelligence to the organisation.
This is so important to the organisation as it gives insight into impact as well as effective use of resources. I know how tough it is to implement a new ERP, but if it is done well and cultural change is the key focus it can, and does, deliver significant improvement in performance to citizens, which is why we get out of bed and work so hard.
I am by no means saying that we have got this sussed, but we are on the journey. It’s excellent to have members pushing for this too, and totally understandable with their focus on outcomes that really matter to them.
It would be great to hear from others that are on the same journey or further along the path.
Rebecca Hellard is a freelance director of finance and currently interim CFO at Birmingham City Council.
