Budgeting- JULY 16, 2008-07-17 Management • Economic goods

• Plan that expresses the activities of an agency in terms of o These are goods or services purchased by consumers
pesos covering a specific period of time from supplies to provide a benefit to the consumers

• Plan for allocation of resources and a control for ensuring • Income

that results comply with the plans
o Additional resources gained over time
• A plan or schedule adjusting expenses during a certain
period to the estimate or fix income for the period • Utility

• An operational management plan stated in terms of income o It is the benefit consumers get from the purchase of
and expenses goods and services

Preparing the budget • Marginal Utility

• Nursing budget- a plan for allocation of resources based o It is the additional utility gained by consuming one
preconceived needs for a proposed series of programs to more unit
deliver patient care during one fiscal year
• Supply
• Hospital budget- is a financial plan to meet future service
o It is the amount of goods or services the suppliers
expectations
are willing to provide at a given price
Pre Requisites for budgeting
• Demand
• Sound organizational structure with clear lines of authority
o It is the amount of goods or services the consumers
and responsibility is needed
are willing to buy at that price
• Nonmonetary statistical data- such as number admission,
• Elasticity of Demand
average length of stay, percentage of occupancy and
number of patient days- are used for planning and control of o It is the degree to which the demand for a good or
the budgetary process
service decreases in response to a price increase and
increases in response to price decrease
• Chart of accounts are designed to be consistent with the
organization plan • Cost Factor
• Management support is essential for a budgetary program o Cost is a money expended for all resources used

• Formal budgeting policies and procedures should be • Expenses

available in the budget manual
o Cost of providing services to patients also called
Applied Economics
OVERHEAD
• Expense Budgeting o Anticipate capital expenses

o The process of forecasting recording and monitoring • Budget Stages

the manpower, materials, and supplies and monetary
needs of an organization o Formulation stage

• Types of Expense or cost fixed  Usually a set number of months before the
start of fiscal year for the budget
o They remain constant as volume increases and
decreases over a period of time • Develop objective and management
plans
• Variable Cost
• Gather all financial, historical, and
o Relate to volume and census statistical data and distribute to cost-
center manager
• Sunk Cost
• Analyze data
o Fixed expenses that cannot be recovered even if a
program is cancelled o Review and Enactment

• Direct Cost  Prepare unit budget

o The cost of providing and service  Present unit budget for approval

• Cost Accounting  Revise and combine into organizational

budget
o System assigns all cost to cost centers
 Revise and distribute to cost-center
• Procedures of Budgeting
o Execution Stage
o Determining the productivity goal
 Direct and evaluate expenses and receipts
o Forecast the workload
 Revise budget if indicated
o Budget patient care hours

o Budget patient care hours and staffing schedule

Historical approach to budgeting
o Plan non productive hours
• Historical approach is the most effective for calculating the
o Chart productive and non productive time relationship between volume of business and variable cost
when a company manufacture a few products and each
o Estimate cost of supply and services
 product contributes a relatively stable percentage to the
total sales volume
Reddin’s theory
• Standard cost- it is develop to predict what labor and
supplies should cost
Budget Approaches
• Zero based budgeting
o It is a method of budgeting used to control cost
o Type of budget no program is take for granted and
each program must be justified each time funds are
requested
• Program budgeting
o It is a part of budget planning
o Items such as continuing education program,
employees benefits fares, health promotion program
• Flexible budgeting
o It determines a range of volume instead an actual
volume which is much more difficult to plan
Lewin’s Theory
• Purpose of budgeting
o To plan the objectives, programs and activities of
services and the fiscal resources need to accomplish
o To motivate nursing workers through analysis of
actual experiences
o To serve as standard to evaluate the performance of
nurse administrator and manger and to increase
awareness of cost
Change theory
• Developed a planned change model that can be used by
nurses
• Suggested seven techniques by which change can be
accomplished
1. Diagnosis- a scientific problem solving
2. Mutual objectives- ensures that the goals of both groups,
those instituting the change and those affected by are
brought into like
3. Group emphasis- team emphasis, change is more successful
when supported by team
4. Maximum information- important to the success of change
5. Discussion of implementation
6. Use of ceremony and ritual consider the culture of
organization, particularly the use of rewards to reinforce the
change
7. Interpretation to any resistance to change- the process and
systems which may require revising of the group work and
objectives set for implementation
• Most widely used change theory
• 3 stages
o Unfreezing stage- development through problem
awareness of a need for change
 Problem is identified and diagnosed and best
solution is selected
  3 possible mechanism provides input to initial 2. Diagnosing the problem
change
3. Acquiring the relevant resources
• Individual expectations are not being
4. Choosing the solution
met (lack of confirmation)
5. Gaining acceptance
• Individuals feels uncomfortable about
some action or lack of action 6. Stabilization and self renewal

• Former obstacles to change no longer Lappit’s theory

exists (psychological safety)
• Added seventh phase to Lewin’s original theory
o Moving stage- working toward change by identifying
problem or need for change, exploring the 1. Diagnosing the problem
alternatives defining goals and objectives, planning
how to accomplish and implementing the plan for 2. Assessing the motivation and capacity
change
3. Assessing the change agent’s motivation and resources
o Defreezing- the integration of the change into one’s
4. Selecting progressive change objectives
personality and the consequent stabilization for
change 5. Choosing the appropriate role of the change agent

Roger’s Theory 6. Maintaining the change

• Modified Lewin’s Change theory 7. Terminating the helping relationship

5 phases Types of change

1. Awareness 1. Coercive changes

2. Interest 2. Emulative change

3. Evaluation 3. Indoctrination change

4. Trial 4. Interactional change

5. Adaptation 5. Natural change

Havelock’s Theory 6. Socialization change

• Expanded to 6 elements 7. Technocratic change

1. Building a relationship 8. Planned change

Resistance to change
Resistance- often based on a threat to the security of the individual
Change- upsets an established pattern of behaviour
means of statements of what is expected from everyone involved
and measurement of what is actually achieved
Procedure and process educating- the process to be used and the
methods for evaluating the programs effectiveness

Causes of Resistance to change First meeting

1. Threatened self interest • The managers creates the condition for fulfilling the nurse
need including the removal of obstacles encouragement of
2. Embarrassment
growth and provision of guidance
3. Insecurity
• Set goals that are specific promote team work that are
4. Habits measurable and attainable

5. Complacency Action

6. Inaccurate perception • Employees perform work that meets their mutual objectives

7. Perceived loss of power Second meeting

8. Rewards or relationship • The meeting will provide a time for evaluation of results,
review, appraisal and the setting of further goals
9. Objective disagreement
Problems of MBO
10. Psychological reactions
1. Top management is not supportive- must be
11. Low tolerance for change
supportive/monitored closely
12. The changes going against the current change
2. Inconsistency exists among mangers0 can be fixed or
13. The system having been stable for a long time avoided by increase

Management- by objectives 3. Goals are too easy or are attainable

• First advocated by Peter Drucker
• Is a process where by the superior and subordinate mangers
of an organization jointly, identify its common goals
• Major arena of responsibility
Odrorne- a system for making organizational structure work, of
bringing about vitality and personal involvement in the hierarcy by
4. Conflicts between goals and policies exists- policies should
give way to the goal
5. Accountability is beyond the control of employees- mange
should modify the goal; make allowance for difference
decrease accountability
6. Employees have a lack of commitment- determine the
cause, produce interaction that will increase commitment
Managerial grid

1, 9- country club management thoughtful attention to needs of

people for satisfying relationship leads to a comfortable, friendly
organization atmospher and work tempo

9,9 team management work accomplishment is from committed

people independence through a common “common stable” in
organization leads to relationship of trust and respect

5,.5 organization man management- adequate organization

performance is possible through balancing the necessity to get out
work with maintaining morale of people at a satisfactory level

1,1 impoverished management- exertion of minimum effort to get

required work done is appropriate to sustain organization
membership

9,1 authority- obedience efficiency in operations results from

arranging conditions of work in such a way that human elements
interfere to a minimum degree