Wednesday, 10 September 2014

Camden's cuts challenge - post 7 - outcomes-based budgeting is for bad times and good

Another advantage of moving to outcomes-based budgeting is it's ability to react both to austerity and to more favourable settlements. 

Compared to salami-slicing (cutting a % from each service), an outcomes-based approach to budgeting is evidence-led, and means that resources are allocated in order to achieve agreed priorities.
A traditional salami-slicing approach to allocating savings means that all areas receive a similar proportion of cut, regardless of the consequential effect on services or on the contribution of the service to key outcomes. 

It’s a short-term approach that can lead to long-term problems. Services can become unsustainable over time as they respond to repeated ‘one off’ savings requirements rather than undergo strategic reform.  They can also become ‘top heavy’ with too many managers and senior staff, not responding to the revised needs of an organisation that has shrunk significantly over a few years.

Austerity means it’s more important than ever to target resources in the areas they are most effective, not just doing less of everything.

But conversely, an outcomes approach to budgeting links resource allocation directly to strategic objectives based on evidence of what succeeds.  This evidence base means that there is a strong correlation between the resource allocated and the expectation of what outcomes will be achieved.  

Therefore if the funding envelope changes the organisation can respond by varying the scale of investment in order to achieve more of an outcome or to achieve it quicker, or if required to scale back investment in outcomes that are of less high priority, and can do this with an understanding of what the effects will be. 

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