Operational managers among other managers are required to prepare human resource, staff scheduling, budget, and schedule estimates before a financial period. These estimates allow financiers and executives to approximate the budgetary allocation for a system’s operations and time required for completion of organizational projects. However, several dangers come with budget estimates which include, but not limited to, an industry-wide difficulty of measuring work units, variations in professional skills, management insistence on inopportune and comprehensive estimates, differences between negotiating and estimation, and estimations based on assumptions of outstanding overtime. This paper seeks to highlight and elaborate on an eight-step approach model which should be implemented to avoid these pitfalls. The steps include: defining parameters, evaluating and understanding the organization’s expertise, analyzing the industry, broadening Project Management Skills, reviewing estimation history, performing extensive research, work breakdown structure application and utilization of TeamGannt (Yourdon, 1989).
Defining Parameters
Before the budgetary estimation, managers should define all parameters and variables which are likely to affect budget estimates as suggested by Auerbach, Gale, and Krupkin (2019) . Parameters of interest include operational costs, time, inventory, and expertise. Managers should also define market dynamics among other variables which are likely to change in the course of the financial period. This step will help to avoid unforeseen dangers in estimation.
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Evaluating and Understanding the Organization’s Expertise
A large organization may comprise of a wide range of professionals who integrate their efforts and technical skills for the achievement of the organizations’ objectives. Therefore, the variation in technical skills within the system renders it difficult for managers to estimate the organization’s budgetary allocation for human resource. The manager should establish good relationships with professional staff to enable him to assess their roles and remuneration with ease, as suggested by Auerbach et al. (2019) . Moreover, the manager can ask employees to take part in the estimation process. By so doing, the manager will be able to create definitive estimates of resources.
Analyzing the Industry
In a bid to avoid an industry-wide difficulty of measuring the work unit, systems managers should observe and analyze all the dynamics and parameters of the industry. This analysis is a lucrative tool that enables managers to understand the organization’s position relative to its competitors and other similar firms. Furthermore, a comprehensive analysis allows project and operational managers to predict opportunities and threats which can have an overall effect on the organization’s budgetary expenditure.
Broadening Project Management Skills
According to Yourdon (1989), systems managers should expand their PM skills through benchmarking and mentorship programs. Long-term experience and exemplary project management skills enable systems managers to distinguish estimates from bids. Systems managers should draw a line between negotiating and estimating since these are two different processes. The managers should negotiate when responding to quotations and bids, and after that, proceed to prepare budget estimates.
Reviewing Estimation History
For systems managers to avoid the dangers of estimation, they should review their previous budgetary estimations. Historical data of the organization can be used to predict trends in fiscal expenditure and provide relevant information which can be used to estimate staff scheduling, people resources, and budget. By looking at how previous management spent on operations, technology, communication, and human resource can give systems managers a glimpse of what to expect in the next financial period. Additionally, historical data on estimates can also help systems managers to avoid underestimation or exaggeration of estimates in the organization, as suggested by Yourdon (1989).
Performing Extensive Research
Research step is the most significant step in the model since it allows managers to implement evidence-based approaches in budget estimation (Yourdon, 1989). Conventionally, systems managers should research on proposed government policies and regulations that are likely to affect the costs of operations within the organization ( Fichtner, Mclaughlin, & Michel, 2018) . If management insists on premature, detailed estimates, systems managers should conduct extensive research into the organization’s operations detailing all activities from the most basic to the most complex. Moreover, they should also provide details of all necessary resources required for completion of the tasks, including time and technology.
Work Breakdown Structure Application
This step involves the breakdown of an organization's operations into phases and subtasks. The Work Breakdown Structure (WBS), highlights the hierarchy of roles and tasks or a combination of other elements necessary for smooth operations within an organization (Yourdon, 1989). Application of this structure helps systems managers to become more granular and specific during the budget estimation process. Moreover, the managers can factor in overtime payments into the budgetary expenditure by comparing the tasks and subtasks against regular working hours.
Utilization of TeamGannt
TeamGannt is a useful planning tool used for hourly allocation of resources within large organizations. Operational managers allocate resources and arrange professionals in a gannt flowchart to determine the hourly rate of operations within the organization. This tool helps systems managers to estimate the time required for the completion of specific tasks; thus, they can quickly determine the budgetary requirement for overtime.
Healthcare institution’s main challenge in budgetary estimation is Medicare and Medicaid restrictions. Hospitals, pharmacies, clinics, and other health facilities exist in a saturated consumer-focused environment which seeks to protect consumers. Medicare and Medicaid restrictions often try to cut costs for medical services without considering operational costs within healthcare systems.
References
Auerbach, A. J., Gale, W. G., & Krupkin, A. (2019). If Not Now, When? New Estimates of the Federal Budget Outlook.
Fichtner, J. J., Mclaughlin, P. A., & Michel, A. N. (2018). Legislative Impact Accounting: Incorporating Prospective and Retrospective Review into a Regulatory Budget. Public Budgeting & Finance , 38 (2), 40-60.
Yourdon, E. (1989). Modern Structured Analysis. Englewood Cliffs, New Jersey 07632: Prentice Hall.
