Budgeting- JULY 16, 2008-07-17 Management o It is the additional utility gained by consuming one more unit

 Supply
 Plan that expresses the activities of an agency in terms of pesos covering a o It is the amount of goods or services the suppliers are willing to
specific period of time provide at a given price
 Plan for allocation of resources and a control for ensuring that results  Demand
comply with the plans o It is the amount of goods or services the consumers are willing to
 A plan or schedule adjusting expenses during a certain period to the buy at that price
estimate or fix income for the period  Elasticity of Demand
 An operational management plan stated in terms of income and expenses o It is the degree to which the demand for a good or service
decreases in response to a price increase and increases in
Preparing the budget
response to price decrease
 Nursing budget- a plan for allocation of resources based preconceived  Cost Factor
needs for a proposed series of programs to deliver patient care during one o Cost is a money expended for all resources used
fiscal year  Expenses
 Hospital budget- is a financial plan to meet future service expectations o Cost of providing services to patients also called OVERHEAD
 Expense Budgeting
Pre Requisites for budgeting o The process of forecasting recording and monitoring the
manpower, materials, and supplies and monetary needs of an
 Sound organizational structure with clear lines of authority and
organization
responsibility is needed
 Types of Expense or cost fixed
 Nonmonetary statistical data- such as number admission, average length of
o They remain constant as volume increases and decreases over a
stay, percentage of occupancy and number of patient days- are used for
period of time
planning and control of the budgetary process
 Variable Cost
 Chart of accounts are designed to be consistent with the organization plan
o Relate to volume and census
 Management support is essential for a budgetary program
 Sunk Cost
 Formal budgeting policies and procedures should be available in the
o Fixed expenses that cannot be recovered even if a program is
budget manual
cancelled
Applied Economics  Direct Cost
o The cost of providing and service
 Economic goods  Cost Accounting
o These are goods or services purchased by consumers from o System assigns all cost to cost centers
supplies to provide a benefit to the consumers  Procedures of Budgeting
 Income o Determining the productivity goal
o Additional resources gained over time o Forecast the workload
 Utility o Budget patient care hours
o It is the benefit consumers get from the purchase of goods and o Budget patient care hours and staffing schedule
services
o Plan non productive hours
 Marginal Utility
 o Chart productive and non productive time  Program budgeting
o Estimate cost of supply and services o It is a part of budget planning
o Anticipate capital expenses o Items such as continuing education program, employees benefits
 Budget Stages fares, health promotion program
o Formulation stage  Flexible budgeting
 Usually a set number of months before the start of fiscal o It determines a range of volume instead an actual volume which is
year for the budget much more difficult to plan
 Develop objective and management plans  Purpose of budgeting
 Gather all financial, historical, and statistical o To plan the objectives, programs and activities of services and the
data and distribute to cost-center manager fiscal resources need to accomplish
 Analyze data o To motivate nursing workers through analysis of actual
o Review and Enactment experiences
 Prepare unit budget o To serve as standard to evaluate the performance of nurse
 Present unit budget for approval administrator and manger and to increase awareness of cost
 Revise and combine into organizational budget
 Revise and distribute to cost-center Change theory
o Execution Stage
Reddin’s theory
 Direct and evaluate expenses and receipts
 Revise budget if indicated  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
Historical approach to budgeting 2. Mutual objectives- ensures that the goals of both groups, those instituting
the change and those affected by are brought into like
 Historical approach is the most effective for calculating the relationship 3. Group emphasis- team emphasis, change is more successful when
between volume of business and variable cost when a company supported by team
manufacture a few products and each product contributes a relatively 4. Maximum information- important to the success of change
stable percentage to the total sales volume 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
 Standard cost- it is develop to predict what labor and supplies should cost
may require revising of the group work and objectives set for
implementation
Budget Approaches
Lewin’s Theory
 Zero based budgeting
 Most widely used change theory
o It is a method of budgeting used to control cost
 3 stages
o Type of budget no program is take for granted and each program
must be justified each time funds are requested
 o Unfreezing stage- development through problem awareness of a 3. Acquiring the relevant resources
need for change
 Problem is identified and diagnosed and best solution is 4. Choosing the solution
selected
5. Gaining acceptance
 3 possible mechanism provides input to initial change
 Individual expectations are not being met (lack 6. Stabilization and self renewal
of confirmation)
 Individuals feels uncomfortable about some Lappit’s theory
action or lack of action
 Added seventh phase to Lewin’s original theory
 Former obstacles to change no longer exists
(psychological safety) 1. Diagnosing the problem
o Moving stage- working toward change by identifying problem or
need for change, exploring the alternatives defining goals and 2. Assessing the motivation and capacity
objectives, planning how to accomplish and implementing the
3. Assessing the change agent’s motivation and resources
plan for change
o Defreezing- the integration of the change into one’s personality 4. Selecting progressive change objectives
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
2. Diagnosing the problem
Resistance to change Odrorne- a system for making organizational structure work, of bringing about
vitality and personal involvement in the hierarcy by means of statements of what is
Resistance- often based on a threat to the security of the individual expected from everyone involved and measurement of what is actually achieved

Change- upsets an established pattern of behaviour 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
2. Embarrassment
the removal of obstacles encouragement of growth and provision of
3. Insecurity guidance

4. Habits  Set goals that are specific promote team work that are 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
9. Objective disagreement and the setting of further goals

10. Psychological reactions Problems of MBO

11. Low tolerance for change 1. Top management is not supportive- must be supportive/monitored closely

12. The changes going against the current change 2. Inconsistency exists among mangers0 can be fixed or avoided by increase

13. The system having been stable for a long time 3. Goals are too easy or are attainable

Management- by objectives 4. Conflicts between goals and policies exists- policies should give way to the
goal
 First advocated by Peter Drucker
5. Accountability is beyond the control of employees- mange should modify
 Is a process where by the superior and subordinate mangers of an
the goal; make allowance for difference decrease accountability
organization jointly, identify its common goals
6. Employees have a lack of commitment- determine the cause, produce
 Major arena of responsibility
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