How can you make budget allocation methods fair and equitable?

1 Incremental budgeting

Incremental budgeting is a simple and traditional method that bases the current budget on the previous one, with some adjustments for inflation, growth, or cuts. This method is easy to implement and maintain, as it requires minimal changes and negotiations. However, it can also be inefficient and rigid, as it does not account for changing circumstances, new opportunities, or emerging problems. It can also create a culture of spending, as units may feel pressured to use up their allocated funds or risk losing them in the next cycle.

2 Zero-based budgeting

Zero-based budgeting is a more radical and innovative method that requires each unit to justify every item of expenditure from scratch, as if they were starting from zero. This method is more effective and flexible, as it allows for a thorough review of the needs, goals, and outcomes of each unit. It can also promote a culture of saving, as units may seek to optimize their use of resources and eliminate waste. However, it can also be time-consuming and complex, as it requires more data, analysis, and negotiation. It can also create a culture of competition, as units may vie for scarce resources or challenge each other's proposals.

3 Performance-based budgeting

Performance-based budgeting is a more strategic and results-oriented method that links the budget allocation to the performance indicators and targets of each unit. This method is more aligned and accountable, as it ensures that the budget reflects the mission, vision, and values of the organization. It can also foster a culture of improvement, as units may strive to achieve their objectives and demonstrate their impact. However, it can also be challenging and subjective, as it requires defining and measuring the performance criteria and standards for each unit. It can also create a culture of pressure, as units may face unrealistic expectations or unfair comparisons.

4 Participatory budgeting

Participatory budgeting is a more democratic and inclusive method that involves the participation of various stakeholders, such as employees, customers, or beneficiaries, in the budget allocation process. This method is more responsive and empowering, as it allows for the input and feedback of those who are affected by or benefit from the budget decisions. It can also enhance a culture of trust, as it promotes transparency and accountability. However, it can also be costly and chaotic, as it requires more communication, coordination, and consultation. It can also create a culture of conflict, as it may expose divergent interests or preferences among different groups.

5 How to make budget allocation methods fair and equitable

As an administrative manager, you need to consider the strengths and weaknesses of various budget allocation methods when selecting the one that best fits your organization's context, culture, and capacity. Additionally, you should ensure that the method is fair and equitable by adhering to principles like aligning the budget with the strategic plan, consulting and communicating with stakeholders, providing clear criteria and guidelines for budget proposals and evaluations, applying the same standards to all units and projects, recognizing performance achievements, and reviewing and revising the budget regularly.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?