PLANNING: Decision-Making and Budgeting

PLANNING:Decision-Making and Budgeting

Jimenez, Aliana ChristelMacapagal, Pauline Anne

Soquila, Micaele RykoTangonan, Emmanuel

Veloso, Roginette Louise

PLANNING:Decision – Making

“Choices are the spice of life.”- Anonymous

ObjectivesBy the end of the report, the listeners will be able to: Differentiate decision-making from problem solving Enumerate the five steps in the decision-making process Compare and contrast the five models of decision-making Define group decision-making Describe creative decision-making techniques Identify blocks to creativity Cite examples of the application of ethical

theories/principles Explain at least one decision-making tool

Decision-Making vs. Problem Solving

Problem solving involves selecting the one correct solution to a problem, while decision making may or may not involve a problem and requires selection of one alternative from several, each of which could be appropriate in certain circumstances. (Sullivan & Decker, 1992)


Decision making differs from problem solving in that it is influenced by emotions and intuition, it is purposeful and goal-directed, it involves a choice among options, and it does not always start with an immediate problem. (Huber, 2000)


Often, decision making is a subset of problem solving, since not all decisions deal with problems, but the solving of any problem requires that one or more decisions must be made. Thus problem solving involves diagnosing a problem and solving it, whereas decision making involves selecting one of two or more alternatives to guide one’s actions. (Lancaster, 1999)

The Process of Decision-Making

Identify problem Explore alternatives Choose most desirable alternative Implement decision Evaluate results

Models for Decision-Making

Rational Model Political Model Collegial Model Bureaucratic Model Garbage Can Model

Rational Model

- Relies on the premise of common goals, technical competence, and sequential process to achieve goals when individual values are consistent with organizational values

- A deliberate action to select the best solution to achieve a desired outcome.

Rational Model- Advantage:

> unifies associates with goals of the agency- Disadvantages:

> unrealistic expectations of how people function> large amount of time for processing> narrow thought processes that become

counterproductive

Political Model

- Built on the premise of a win-win situation, diversity of interest, even dispersion of power, and available forums for people with multiple conflicting values that protect their own self-interest.

- Lobby majority makes the decision

Political Model

- Changes are based on negotiations rather than causal links and are unpredictable.

- Facilitates creative solutions with majority support that are implemented even if there are different POV

Collegial Model- Full participation of a community of peers is

required for decision making- Based on the premise of group consensus,

mutual respect, and adequate time- Takes considerable time because of numerous

group meetings of individuals with diverse and specialized information

- Smooth implementation happens when there is consensus

Bureaucratic Model

- Common in healthcare- Change is implemented through routines as

determined by policies and procedures that lead to predictable outcomes with little adaptation to operations.

- Based on premises of historical norms and operating routines.

Bureaucratic Model

- Hierarchy dictates the key players- Information comes from history, tradition, and

norms- Time for implementation depends on the

efficiency of operations- Does not recognize informal channels

Bureaucratic Model

- Alternative solutions generated may be limited and depend on the historical success of the agency and corporate memory.

- A past inefficient operation may be perpetuated. A history of efficiency , changes consistent with history and norms may be made with little resistance.

Garbage Can Model- Based on pure accident- Decisions are based on multiple diffused values- Implementation has no planning- Outcomes may repeat errors and depends on

creativity- Coincidental, incidental, and occurs by chance- Key players see opportunities and

contribute to anarchy and adhocracy

Group Decision-MakingDefinitionAdvantages and DisadvantagesGroup Decision Making Techniques

Definitionapplication of decision making skills in

solving problems utilizing the group instead of the individual decision maker

The effectiveness of the group is determined by:◦the size of the group◦the personalities of the group members

AdvantagesWider range of knowledgeAllows the nurse to express her views and

attempt to persuade othersPeople are more apt to be committed to

implementationLess time consuming if group members

have diverse backgrounds

DisadvantagesGroup decisions may result from social

pressures.A minority may rule if an individual or

a few people dominate the group.Members may become more

interested in winning an argument than in determining the best alternative.

Choosing the most acceptable solution may produce consensus, which is not necessarily the optimal alternative.

TECHNIQUES

Nominal Group Technique1. The members write their ideas or responses regarding

the issue or question posed by the group leader2. The ideas will be presented to the group including the

advantages and disadvantages of each3. The ideas presented are clarified and evaluated4. The members of the group will vote on the ideas and

the ideas which have the greatest number of votes will be the solutions implemented

Delphi Group Techniquegroup members are not meeting face to

face (may be dispersed over a geographical area)

Questionnaires are used instead

Delphi Group Technique1. A problem is identified.2. Members are asked to suggest potential

solutions through the use of a questionnaire.

3. Members anonymously return the first questionnaire, and the results are centrally compiled.

4. Each member is sent a copy of the results.5. After viewing them, members are asked for

their suggestions again.

Delphi Group TechniqueReview of the results of the first

questionnaire typically triggers new solutions or stimulates changes in original positions.

This technique shields group members from one another’s influence.

Does not require physical presence.

It can involve more participants and thus it generates more ideas.

Consensus BuildingBringing people onto the teamListening to their ideasRealistically considering their ideasUsing their ideasInvolving them in critical thinking

Time consuming

Group ThinkSeeks fast

solutions with little critical thinking or input from group members

People conform rather than challenge ideas

Poor decisions can result

Group ThinkStrategies to avoid groupthink:

1. Group leaders should encourage all group members to think independently and verbalize their individual ideas

2. The leader should allow the group time to gather further data already collected

Creative Decision MakingEmphasizes the uniqueness of a solution

Divergent ThinkingSpontaneous, free-flowing,

generation of random, unorganized thinking

Goal is to generate many different ideas quickly

Breaks topic down to gain insights and the view of the problem is expanded because the problem is considered in different ways

DIVERGENT THINKING TECHNIQUES

MeditationOptimal performance in relaxed

concentration Playing looseInvolves contemplationHelps integrate body, mind and spirit

BrainstormingLists ideas in an unstructured wayWorks best for simple and specific

problemsEarly notification of participants

regarding the task at hand speeds up the process

Reverse brainstormingTurns negativism into creative problems

solving by identifying a problem and asking what causes it.

Example: What causes burn out instead of what can be done to prevent burn out

Brain WritingEncourages free association of ideas

without verbal interaction.1. A problem is identified. 2. Participants are given a blank piece of

paper and are told to write at least four ideas, suggestions, solutions, and so forth. The paper is passed on to someone else.

3. Reading others’ ideas is intended to stimulate more ideas.

Collective Notebook Technique

1. People keep ideas on a specified topic on a notebook for a certain period.

2. Participants give the notebook to another person after writing to search for patterns and synthesis.

3. Meetings are done afterwards to analyze and make recommendations

Stepladder TechniqueStructures entry of group members into

the group to ensure that each one contributes.

The task is known to the participants before the meeting so that they can think about it before presenting

Final decision is delayed until all have presented.

Ladder of AbstractionEncourages making abstract options

more concrete, focused, and specific and making specific narrow options broader and more abstract.

Discussing concepts, defining them, and giving concrete examples moves from abstract to concrete

Why questions broaden while how questions make things more specific

Forced Association or FittingSituations that require improvements are

identified.A list of associated words is generated

and recorded.Relationships are indentified.Forcing a relationship can be done for

random item and task at hand.

Visual trekGood for stretching the mind to generate

original and unusual options.Done by making a mental journey away

from a task and then connecting back to the original task.

Think TanksFive to eight people are gathered in an exotic or different place to stimulate innovation

Convergent ThinkingAfter generating ideas from divergent

thinking, there is a need for structure using convergent thinking.

Groups together ideas to find a more manageable perspective

CONVERGENT THINKING TECHNIQUES

ListsUsed to assemble criteria on a checklist,

sort it, and prioritize it

Morphological MatrixCombines elements from different

attributes by creating frameworks for new options

Patient’s diet example

HighlightingFocusing tool that condenses a variety of

options into themes making it more manageable in terms of number.

Short Medium Long (SML)Focusing tool used to determine the

order in which options are deliberated, compared timing to alternatives, and sequenced

SynecticsJoining together of apparently irrelevant

elements.Problems are reduced to analogies.

VisualizationDream about what you want and think

about what you can do to make it reality

Visually Identifying RelationshipsProvides reflective time to generate

options particularly good for visual learnersSteps◦Relaxation to clear the mind◦Showing of pictures◦Recording of observation and reaction to each

picture

Self interrogation checklist◦Questions are used to stimulate more ideas

Modelling◦Look at how others are doing what one wants

to do.Evaluation Matrix◦Structures a way to evaluate several options

against specific criteria

Paired Comparison AnalysisSystematically compares or ranks several

options against each otherScoring and discussion

Developing Creative Thinking AttitudesBe open mindedHave an inquiring mindBe not unduly concerned with

others’ opinionTrust, acceptance, and humor

help create a conducive environment

Have internal motivation, mental ability, objectivity, tolerance for complexity, enjoyment of risk taking, and ability to find problems

Blocks to CreativityNegative attitudeSelf-censorshipInflexibilityLack of confidenceMisconceptionsLack of effortHabitsConformityReliance on authority

Ethical Aspects of Decision-Making

TheoriesPrinciplesPositions

Ethics- A moral philosophy, a science of judging

the relationship of means to ends, and the art of controlling means so they will serve human ends

- Involves conflict, choice, and conscience.- Ethical choices are influenced by

values, but must also consider wants, needs, and rights.

Ethical TheoriesDeontological Theory◦“deon” = duty◦Focuses on the intent of the action rather than

the end of the action◦Emphasis is on the dignity of human beings

Teleological Theory / Consequentialism ◦“telos” = end◦What is right has good consequences, what is

wrong has bad consequences ◦The greatest amount of good and happiness

are good

Ethical TheoriesEgoism◦Based on self-interest and self-centeredness◦The right decision brings pleasure to the

decision-makerObligationism◦Tries to balance distributive justice and

beneficence◦Do what is good and prevent harm◦Useful for determining public policy

Ethical TheoriesSocial Contract Theory◦Based on a concept of original position and

considers the least advantaged persons in society as the norm

◦Right and wrong is seen from the perspective of the least advantaged (the handicapped, or the children)

◦Give the most to least advantaged

Ethical TheoriesPrincipalism◦ Includes ethical principles◦The ethical principles control ethical decision-

making more than the ethical theories◦Autonomy, beneficence, fidelity, justice,

nonmaleficence, paternalism, respect for others, utility, and veracity

◦Each can be used individually, but often used in concert

Ethical Principles- Are more universal action guides than

rules or values- Whereas rules and values are more

restricted and narrow in scope, principles are general and fundamental (Lancaster, 1999)

- They do not define the course precisely, but they serve as guides to keep people on course

Ethical PrinciplesAutonomy◦ Involves personal freedom, freedom of choice,

and responsibility for one’s choicesBeneficence◦Actions should be in an effort to promote good

Fidelity◦Keeping one’s commitments and promises

Justice◦Treating people equally and fairly

Ethical PrinciplesDistributive Justice◦Benefits and burdens should be distributed

equally regardless of gender, race, religion, or socioeconomic status

Nonmaleficence◦ If you cannot do good, at least do no harm

Paternalism◦Allows one to make decisions for another,

limits freedom of choice, and is seen as an undesirable principle

Ethical PrinciplesRespect for others◦The highest principle that incorporates all

other principles◦Acknowledges rights of others to live by their

own decisionsUtility◦What is best for the common good outweighs

what is best for the individualVeracity◦People should tell the truth so that they can

make well-informed decisions

Ethical PositionsUtilitarianism◦Focuses on consequences and prefers greatest

amount of good and happiness for the most people, or the least amount of harm

Egoism◦Seeks solutions best for oneself without regard

to others Formalism◦Considers the nature of the act and the related

principles without thought to personal position or consequences of the actions

Ethical PositionsRule Ethics◦Expects obedience to laws, rules, professional

codes, and authorityFairness◦Considers distribution of benefits and liabilities

from the viewpoint of the least-advantaged population

◦Benefit is for the least advantageous group

DECISION-MAKING TOOLS

Probability Theory

• Can be applied when risk or uncertainty is present in a decision

• Assumes that factors occur in a predictable pattern

• Analyzes a sample of the population• A probability can substitute for otherwise

unknown information, limiting the margin of error but not completely removing it

Probability Theory

• There are three criteria that assume that previous experience is necessary to work with probability:– “Maximax” criterion– “Maximin” criterion– “Minimax” criterion

• Uncertainty arises when there are no historical data on which to calculate probabilities

Simulation, Models, and Games

• Simulation– A way of using models and games to simplify

problems– Identifies basic components– Uses trial and error to determine solution– One may compare alternatives and consequences

before making a choice– May be used to study organizational changes,

scheduling, assembly line management, and time sequences


• Models– Represent something else (objects, events,

processes, or systems)– Used to simplify studies occurring under varying

conditions– Convenient and low-cost– They may vary considerably in the accuracy with

which they represent real situations, but they increase predictive capabilities


• Models– Developed to describe, explain, and predict

phenomena– Conceptualization is critical– Ex: life-size mannequins used in N11, N12 and

N105 Laboratory Exercises


• Games– Simulation of systems operations– The player develops a strategy that will maximize

gains and minimize losses regardless of what the competitor does

– Particularly useful in training for decision-making

Gantt Chart• Developed by Henry Gantt• Highly developed schedules that allow one to

visualize multiple tasks that have to be done• A grid with columns for tasks, assigned

responsibility, and time frame

Decision Trees

• A graphic method that helps managers visualize the alternatives available, outcomes, risks, and information needs for a specific problem over a period of time

• Does not depict an obviously correct decision, it allows managers to base their decision on a consideration of various alternatives and probable consequences

Decision Trees

Program Evaluation and Review Technique (PERT)

• A network system model for planning and control under uncertain conditions

• It involves identifying the key activities in a project, sequencing them in a flow diagram, and assigning the duration of each phase of the work

• Appropriate for one-of-a-kind projects that involve extensive research and development

Program Evaluation and Review Technique (PERT)

• Recognizes that certain tasks must be completed before the total project can be completed.

• Also deals with the problem of uncertainty with respect to time by estimating the time variances associated with expected time of completion of subtasks

• Helps managers determine priorities

Critical Path Method (CPM)

• Closely related to PERT• Calculates a single time estimate for each

activity, the longest possible time, and then a cost estimate is figured

• Useful when cost is a significant factor and experience provides basis for estimating time and cost

PERT and CPM

Queuing Theory

• Deals with waiting lines or intermittent servicing problems

• A mathematical technique for determining the most efficient balance of factors related to intermittent service

• Applicable when units to receive service arrive in a random fashion but the time required for services is predictable

Queuing Theory

• The time of arrival is an important factor in determining the optimal size of facilities and staffing

• Staffing is adjusted so that more personnel are on duty when there is a predicted rise in the number of clients

• Saves costs

Decision-Making Tools

Probability Theory Simulation, Models, and Games Gantt Chart Decision Trees Program Evaluation and Review Technique

(PERT) Critical Path Method (CPM) Queuing Theory

Budgeting

PLANNING:

ObjectivesBy the end of the report, the listeners will be able to: Differentiate budgetary leadership from budgetary

management Define budget Describe the different types of budget Compare and contrast the different budgeting

methods Explain the advantages and disadvantages of

budgeting Enumerate the steps in the budgeting process

Budgeting / Fiscal Planning

• The cost involved in the delivery of service is one of the key factors that influence patient care.

• The challenge is to ensure the quality of care and the caliber of the staff in a cost- controlled environment.

Budgetary Leadership and Management

• The current environment demands greater economic needs. Thus, it is increasingly important for nurses to understand economics and marketing, and to speak the related language.

• Historically, nursing management played a limited role in determining resource allocation in healthcare institutions.

• Nurse managers were given budgets without any rationale and were allowed limited input.

Budgetary Leadership and Management

• During the last 20 years, healthcare organizations have grown to recognize the importance of nursing inputs in fiscal planning

• Nursing budgets have the one of the greatest shares in total expenses of a healthcare institution, therefore making budgeting a fundamental and powerful tool for nursing.

Leadership Roles in Budgeting

A leader:- Has the ability to forecast short and long-term

unit needs- Is knowledgeable about political, social and

economic factors- Demonstrates flexibility in budget goal setting

Leadership Roles in Budgeting

A leader:- Anticipates, recognizes, and solves budget

constraints- Influences members to become active in the

budgeting process- Ensures that client safety is not compromised

by cost containment.

Management Roles in Budgeting

A manager:- Identifies and develops fiscal plans that

reflects the units needs- Documents unit needs effectively to higher

administrative levels- Assesses the environment to determine the

driving force and barriers to fiscal planning


A manager:- Demonstrates knowledge in budgeting and

uses appropriate techniques- Coordinates budgeting to match

organizational goals and objectives- Assesses personnel needs using

predetermined standards or an established patient classification system


A manager:- Coordinates monitoring aspect of budget

control- Ensures clear documentation of client’s need

for services and the corresponding services being rendered

Budget

• A plan that uses numerical data to predict the activities of an organization over a period of time. (Marquis, 2003)

• Provides a mechanism of planning and control, as well as promoting a unit’s needs and contributions.

Types of Expenses

1. Fixed expenses- expenses that do not vary from time to time

2. Variable expenses- expenses that have been subjected to

change, usually dependent to volume3. Controllable and non-controllable expenses

- expenses that can be manipulated by the manager

* Although budgets are usually associated with financial statements such as revenues and expenses, they also may be non-financial statements covering output, materials, and equipment.

Prerequisites to Budgeting

• A sound organizational structure with clear lines of authority and responsibility

• Non-monetary statistical data • Charts of accounts• Managerial support • Formal budgeting policies and procedures

Types of Budget

There are three major types of budget involved in fiscal planning:

Personnel Budget Operating Budget Capital Budget

(Marquis, 2003)

Personnel Budget

• The largest of all budget expenditures• Personnel budgets estimate the cost of direct

labor necessary to meet the agency’s objectives

• They determine the recruitment, hiring, assignment, layoff, and discharge of personnel

Operating Budget

• Daily cost required to maintain a hospital or healthcare institution

• Included in this budget are expenses such as the cost of electricity, repairs and maintenance, and medical/surgical supplies

Capital Budget

• Budget allotted for acquisition of materials that will serve for a long period of time

• Includes purchase and upgrades of buildings and major equipments that has a long life (usually greater than 5 to 7 years)

Budgeting Methods

Incremental Budgeting Zero-based Budgeting Flexible Budgeting New Performance Budgeting

(Marquis and Huston, 2005)

Incremental Budgeting

• Also called flat-percentage increase method• Simplest method for budgeting• Budget of the coming year is projected by

multiplying the budget of the previous year by the inflation rate or the consumer price index

• Ineffective fiscally because:– There is no motivation to contain costs– There is no need to prioritize programs and

services

Zero-based Budgeting

• Method of budgeting used to control cost• Does not automatically assume that because a

program has been funded in the past, it should continue to be funded

• No program is taken for granted• Key feature is the use of decision packages to

set funding priorities

Zero-based Budgeting

• Method of budgeting used to control cost• Does not automatically assume that because a

program has been funded in the past, it should continue to be funded

• No program is taken for granted• Key feature is the use of decision packages to

set funding priorities

Decision package

Key components:1. Listing of all current and proposed objectives

or activities in the department2. Alternative plans for carrying out these

activities3. Costs for each alternative4. Advantages and disadvantages

Example:

Implementing a mandatory Hepatitis B vaccination program at a nursing school

Objective: All students will complete Hep B vaccination series

Driving forces: Hepatitis B is a severely debilitating disease. It is required that Hep B vaccine be offered to health care workers including student nurses.

Example:

Implementing a mandatory Hepatitis B vaccination program at a nursing school

Restraining forces: Vaccination costs $175 per student. Some students do not want to have the vaccinations believing that requiring to do so is a violation of free choice.

Alternative 1: Require the vaccinations. In addition, because the school cannot afford to pay for the cost of the series, require that the students pay for it.

Advantage: No cost to the school. All students receive vaccinations.

Disadvantage: Many students cannot afford the cost of the vaccination and believe that requiring it infringes on their right to control choices about their bodies.

Alternative 2: Do not require the vaccination series.

Advantage: No cost to anyone. Students have choice regarding whether to have the vaccinations and assume the responsibility of protecting their health themselves.

Disadvantage: Some student nurses will be unprotected against hepatitis B while working in a high risk clinical setting

Alternative 3: Require the vaccination, but share the cost between the students and the school.

Advantage: Decreased cost to students. All students would be vaccinated.

Disadvantage: Costs and limited choice.

Flexible Budgeting

• Involves budgets that automatically adjust over the course of the year

• Based on factors such as labor costs, volume and capital expenditures

• Automatic calculation of what the expenses should be

Advantages of Budgeting

• Plans for detailed program activities• Helps fix accountability by assignment of

responsibility and authority• Encourages personnel• Reveals weaknesses in the organization or

agency• Financial matters are handled in an orderly

fashion

Disadvantages of Budgeting

• Only the easily measurable aspects are considered and equally important factors such as organizational development and research efforts may be ignored

• Danger of over-budgeting that may lead to a budget that is cumbersome, meaningless, and expensive

• Skill and experience are required for successful budgetary control

• Budget planning is time consuming and expensive

Budgeting Process• Budget preparation– Focuses on assessing what the budget content

should be based on inputs from all the levels of the organizational hierarchy

• Development of budget– Includes the projection of revenue and expenses– Revenue is the income generated through a variety

of means including billable patient services, investment, and donations to the organization

– Expenses are determined by identifying the cost associated with the delivery of service

Budgeting Process

• Budget implementation– with focus on budget monitoring and control

• Budget evaluation– periodical review and modification of the budget

as needed

Thank you for not sleeping! : )