The Challenges of Developing a Budget during Strained Times

These days, most higher education institutions seem to be managing and developing budgets against a reduced pool of funding. So what does it take to develop an IT budget during strained times?

The answer will vary depending on the budgeting process your institution has in place and the type of funding that is available. What is universal, however, is that budgeting involves a lot of effort, deliberate planning, negotiation, and compromise among those who are involved in the process. Learning how to lead in these areas is a critical part of successfully developing and managing a budget during periods when funding levels are lower than expected.

Individuals who have budgetary responsibilities are tasked with figuring out how to keep the lights on, maintain the current infrastructure, meet institutional goals, innovate where possible, and accommodate the increasing demand for technology services and solutions (which seems to grow each year while the growth in the resources that are necessary to meet that demand lags behind).

The following tips may help IT leaders develop and maintain a budget—especially if the target funding amount is lower than the current budget allocations.

Create a Strong Relationship with Finance

How often do you stay in contact with the finance department throughout the fiscal year? Do you reach out to financial leaders for advice, keep them informed on critical and important initiatives, or brainstorm and collaborate on ideas and initiatives that bring value to the organization? Do you let the finance office know when issues arise or when making a purchase? If you do only the latter, changing your relationship with the finance department is a necessary first step.

Finance can be a strategic partner given that it has a pulse on the financial and operational landscape of the organization, is aware of the many initiatives competing for a limited pool of funds, and is among the first to know about institutional funding changes. Having strong partnerships with staff members in the finance office can make a difference during the budget planning process. They can provide valuable guidance and insight into an array of finance-related issues, help to address budgetary obstacles, and provide support during budget committee discussions.

Manage Your Budget

Execute due diligence when maintaining your current budget. Track expenses and burn rates, and adjust and reforecast where appropriate to accommodate changes to expenses that were not accounted for when the budget was developed. This ongoing maintenance effort will help you develop fiscal awareness, ensure that balances are accurate, and realign expenses to address challenges that may arise. All of these activities provide a holistic view of the budget and support efforts to keep the organization on track in meeting operational objectives. Because the budget for the current fiscal year typically serves as a baseline for the development of the budget for the next fiscal year, regular budget management and maintenance is vitally important.

Understand Your Budget, Especially When Making Changes or Reductions

A typical IT budget has a combination of personnel, non-personnel, and capital expenses, with personnel expenses commonly taking up to two-thirds of the overall budget. Developing a budget with targets that are lower than the current allocation when there are little to no discretionary funds available requires a methodical approach in which targeted reductions or cuts are made. During strained times, budget-cutting is an all-too-common and unpleasant activity that confronts all leaders who have budgetary responsibilities. Simply reviewing your numbers and reducing budgetary line items to meet reduction targets without understanding the impact of those changes is not appropriate.

With any reduction activity, the goal is to reduce the budget without compromising the ability to deliver solutions and services. It is important for IT leaders to understand the reasons that are driving the reduction. Are the factors associated with legislative policy changes? Are they related to lower enrollment or some other campus dynamic? Understanding these drivers will help you to establish a reduction strategy. Budget strategies to address reductions that have short-term impacts may focus more on cutting nonrecurring expenses. Sustaining longer-term/permanent reductions requires recurring costs to be strategically targeted more than nonrecurring costs, since nonrecurring expenses are one-time funds that don't get replenished.

Target Reductions

Any targeted reductions start with identifying expenses or solutions that are no longer needed or identifying excess funds that have little or no impact on the delivery of services and solutions. Further reductions can target less-critical services and solutions, followed by cuts to more critical services and solutions. In the area of staffing, vacant positions can be evaluated to determine what impact a temporary delay on recruitment—or the elimination of the position—would have on the organization. Eliminating services, decommissioning solutions, and reducing staffing are extreme reduction approaches that will realize greater reductions in costs but will have a higher impact on the organization. Such extreme reductions must be in alignment with the overall organizational strategy and evaluated in detail before being implemented.

Communicate, Communicate, Communicate

Few people realize how difficult it can be to comb through an IT budget to strategically target items for reduction or elimination in order to meet budgetary goals without compromising the department's ability to deliver services. Be that as it may, throughout the budgeting process, when people hear about potential budget reductions, they will have questions, become distracted, and start to worry about how they will be impacted. As the budget is finalized, leaders should find ways to communicate budgetary changes with their teams, focusing on the areas that were reduced and cut, the overall impact of the reductions and cuts, and the strategies that can be used to weather strained times. This level of engagement is essential to ensure transparency and provide people with the necessary reassurances for continued operations.

Leading through Budgeting

These are just a few of the many strategies involved in the development and maintenance of an IT budget during uncertain times. The one thing that is certain is that budgeting should not be done only once or even a few times a year during "budget season." It is a continuous planning process that should be undertaken with an appreciation for how past and current budgetary decisions may impact budgeting in future years.

Michael Duong is Associate Vice President for Health and Information Technology at the University of Central Florida College of Medicine.