1. Linking Strategic Planning and Budgeting
Dennis P. Jones
Presented to
Minnesota State Colleges and Universities
January 11, 2001
National Center for Higher Education Management Systems
P.O. Box Boulder, Colorado (303)

2. Management Cycle Planning Resource Allocation Assessment
Strategic Management —The allocation of resources to programmed activities calculated to achieve a set of goals.

3. The Management Cycle in a Public Institution
State
Planning
Institution
Assessment
Resource Allocation

4. Planning
Making Decisions about Organizational Priorities that Specify What Changes in Intentions, Competencies, or Behaviors the Organization Will Pursue
The Mechanism Through Which Organizational Values and Methods of Identifying Them Are Affirmed
NOTE:
Planning must result in Decisions.
It is fundamentally a Change Process.

5. Strategic Decision Areas
Basic Mission
Clientele
Program/ Service Mix
Comparative Advantage
Assets
Objectives
Basic Purposes of the Enterprise and its Guiding Principles for Behavior
Target Audiences of the Institution
Program Offerings and Priorities of the Institution
“Differential Advantage” Sought Over Other Organizations Engaged in Similar Activities
Changes Needed in Human, Physical, Information or Intangible Assets of the Enterprise
What the Organization Must Accomplish in Order to Move from Existing to Desired State of Affairs

6. The Product of the Strategic Planning Process— Institutional Priorities/Strategic Themes
Characteristics
Institutional Issues
Cannot Be Addressed by a Single Unit
Cannot Be Identified by Finding Common Elements in Unit Plans
Long-Term—Cannot Be Resolved in a Single Year
Require Responses Through Basic Institutional Processes—Are not Programmatic “Add-Ons”

7. Examples of Strategic Themes
Become More Client-Centered
Students
Employers
Communities
Address the Particular Needs of Underserved Clients
Minorities
Geographically Remote Areas
Academically Poorly Prepared
Improve Retention and Graduation Rates
Incorporate Use of Technology in All Institutional Functions

8. That Distribute Resources
What Is Budgeting?
Making Decisions
That Distribute Resources
To Enable Action

9. What Is Budgeting? (cont.)
The Budget Is the Primary Device by Which an Organization:
Carries Out Its Plans
Signals Its Priorities
Other Mechanisms Include:
Organizational Alignment
Regulation/Procedures
Accountability
The budget is the mechanism through which positive incentives for change can be created.

10. The Typical Budget Process
Starts with Revenue Estimates
Involves Budget Guidelines Focused on Price Changes
Salary Increases
Operations/Utilities
Equipment
Invites Units to Submit:
Budgets Within These Guidelines
Special Requests
Involves “Triage” at Every Step up the Organizational Structure

11. Linking Planning and Budgeting...
…Is So Difficult Because:
Planning Is Typically Conducted at the Strategic Level
Budgeting Is Typically Focused at the Operational Level
We need to develop an approach to strategic budgeting.

12. Decisionmaking Strategic Decisions Focus on the:
Creation and Maintenance of Institutional Capacity
Utilization of that Capacity in Ways Designed to Accomplish Specified Purposes
Operational Decisions Focus on the:

13. The Focus of Budget Decisions
Assets
What Kinds Will We Have/Own?
In What Quantities/How Many?
With What Characteristics?
Quality
Appropriateness
At What Price?
What Are Assumptions about Levels of Utilization?

14. The Focus of Budget Decisions (cont.)
Consumables (Utilities, Insurance, Supplies, etc.)
In What Quantities?
At What Prices?
Revenues
In What Amounts?
From Which Sources?
Allocation
To Which Units?
To What Ends? (the Basis of Accountability)

15. One Set of Trade-Offs = Unit Total Total Revenues
Quantity Characteristics Utilization Cost Cost $ Rev. $ Sources
Assets
Personnel
Facilities
Equipment
Collections
Students
Finances
Program
Consumables
Services
Supplies
Utilities
Contingency
New Initiatives
Tuition
Appropriations
Govt. Grants
Private Gifts
Endowment
Sales & Services
Other
Reserves =

16. A Second Set of Trade-Offs
Assets
( Personnel, Equipment, etc.)
Consumables
Organizational Units
College A
Dept. 1
Dept. 2
College B
Dept. 10
Dept. 11
Administrative Units

17. Structure of the Budget
In order for the budget to respond to the responsibilities of institutional leaders and link to the strategic plan, it is suggested that:
1. The budget be given a structure that explicitly reflects the areas of responsibility of strategic level decisionmakers—that it contain the following components:
2. The budget process be such that guidelines are established around each component prior to initiating unit level budget-building.
Base/Continuation—the Status Quo Adjusted for Price Changes
Strategic Initiatives
Contingency
Asset Maintenance
Asset Creation/Deletion—Intentional Changes in the Asset Structure

18. To Evaluate the Budget, Ask Questions
About Changes in the Asset Structure
How will staffing patterns change?
How will materials acquisitions be affected?
How will the stock of equipment/technology change?
About Asset Maintenance
What is relationship between expenditures on renovation and renewal of plant and replacement value of plant?
What is rate of replacement of equipment?
What is the ratio of personnel development to compensation?
What is trend in expenditures on curriculum development?
What level of financial reserves is being maintained?
How effective is the investment in student financial aid?

19. To Evaluate the Budget, Ask Questions (cont.)
About the Contingency Fund
How large is the contingency fund relative to the operating budget?
About the Consequences of Resource Utilization
What is the evidence that the institutional priorities are being achieved? That the institution is fulfilling its mission?
What is the evidence that the state/system priorities are being achieved?

20. The Role of the CFO Assemble the Data
Revenues
Maintenance of Assets
Consumables
Investment in Strategic Initiatives
Contingency
Calculate the Size of the Gap—The Unmet Need
Compile Benchmark Data
Staffing
Faculty Productivity
Etc.
(continued)

21. The Role of the CFO (cont.)
Make Clear the Nature of the Tradeoffs—What Would Have to Be Given Up to Balance the Budget?
What % of Facilities Renewal?
What % of Equipment Investment?
How Many Positions?
What % of Operating Budgeting?
Engage the Cabinet in Making the Decisions—This Is the Job of Institutional Leadership, not Just the CFO.