PLANNING
CECILLE O. MARTINEZ
RN,RM,MAN, EdD (c)
PLANNING
Planning may be defined as a deciding
in advance what to do; Who is to do
it; and how; when, and where it is to
be done.
Therefore all planning involves a
choice : a necessity to choose from
among alternatives.
This definition implies that planning
is proactive and deliberated process
2
Planning
Planning is concerned with the future
impact of today's decisions.
It is the fundamental function of
management from which the other
four stem.
The organizing, staffing, leading and
controlling functions stem from the
planning function
PLANNING
The manager is ready to organize and staff only
after goals and plans to reach the goals are in
place.
Likewise, the leading function, influencing the
behavior of people in the organization, depends on
the goals to be achieved.
Finally, in the controlling function, the
determination of whether or not goals are being
accomplished and standards met is based on the
planning function.
The planning function provides the goals and
standards that drive the controlling function.
Importance of Planning
Planning leads to achievement of
goals and objectives
Planning gives meaning to work
Planning provides for effective use
of available resources and facilities
(best use of personnel and material
resources prevents wastage)
Planning helps in coping with crisis
5
Importance of Planning
Planning is cost effective costs
can be controlled through planning
for efficient operation
Projecting the number of operations in a given
day, including daily dressings, helps in
determining accurately the needed weekly
supplies in the surgical units so as to prevent
undersupply, oversupply or pilferages (taken by
other person)
Importance of Planning
Planning is based on the past and
future activities evaluation of programs,
schedule and activities whether successful or not
prevent and/or reduces the recurrence of
problem and provides better ideas in modifying or
avoiding them
Planning leads to the realization of
the need for change establishment of
OPD rather than admission can greatly reduced
days in hospital
Planning provides the basis for
control - basis for evaluating the
accomplishment of a program
Importance of Planning
Planning is necessary for effective
control nurse manager evaluate the
environment or setting in which they work
or where the patients are confined and
make necessary recommendations to make
hospital conditions more therapeutic not
only for the patients but for the workers
as well.
8
4 MAJOR ASPECTS
OF PLANNING
1. PLANNING SHOULD CONTRIBUTE
TO OBJECTIVE
2. PLANNING PRECEDES ALL OTHER
PROCESSES OF MANAGEMENT
3. PLANNING PERVADES ALL
LEVELS
4. PLANNING SHOULD BE
EFFICIENT
Four Stages of Planning
1. Establish objectives (goals)
2. Evaluate the present situation and
predict future trends and events
3. Formulate a planning statement
(means)
4. Convert the plan into an action
statement
10
Planning Terminology
Vision -Statement that outlines the
organizations future role and
function
Gives the agency something to strive for
Nonspecific directional and motivational
guidance for the entire organization.
Top managers normally provide a vision for the
business.
It is the most emotional of the four levels in
the hierarchy of purposes.
11
Planning Terminology
Mission statement that outlines
the agencys reason for existing
(whether hospital or health care)
It is concerned with scope of the business and
what distinguishes this business from similar
businesses (includes: who the target clients are
( the poor, the needy, middle and upper class);
and what services will be provided (in-patient,
out-patient, ER)
Mission reflects the culture and values of top
management.
12
Planning Terminology
Philosophy describes the vision
It is a statement of belief and values that direct
ones life or ones practice
In an organization, it is the sense of purpose of
the organization and the reason behind its
structure and goals
Its a written statement of philosophy that
explains the belief that shape how the mission or
purpose will be achieved
13
It gives direction towards the attainment of
the
Planning Terminology
Objectives
Objectives refine the mission and address key
issues within the organization
They are concrete and specific in nature
They are expected to be observable,
challenging, and untimed.
They are stated in terms of results to be
achieve and should focus on the production,
health care services to patients.
They are action commitments through which
san organizations mission and purpose will be
achieved and the philosophy or belief
sustained.
14
Planning Terminology
Goals
Goals are general statements of
anticipated results
They are expected to be SMART:
Specific, Measurable, Attainable,
Rewarding, and Timed.
15
Planning Terminology
Forecasting -
helps manager look into the
future and decide in advance where the agency
would like to be and what is to be done in order to
get there.
With estimates, provide the basis for planning
Includes:
Environment in which the plan will be
executed
Who the client is their customs, belief, language,
dialect barriers. Public attitude and behavior, severity
of` condition or illnesses, the kind of care they will
receive.
The number and kind of personnel required
The necessary resources
16
Planning Terminology
Development of tactics is a fifth level of
planning.
Tactics, the most specific and narrow
plans, describe who, what, when, where and
how activities will take place to accomplish
a goal.
17
TYPE OF PLANNING
Strategic Planning - refers to the
process of continual assessment,
planning, and evaluation to guide the
future.
Its purpose is to create an image of
the desired future and design ways
to make those plans a reality.
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Strategic Planning
In strategic planning, management
analyzes inside and outside factors that
may affect the company and so objectives
and goals.
Here they should have a study of
strengths and weaknesses, opportunities
and threats.
For management to do this efficiently, it
has to be very practical and ample.
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Tactical Planning
Tactical planning deals primarily with
the implementation phase of the
planning process
Tactical planning turns strategy into
reality
Tactical planning usually has a 1-2
year time horizon
Tactical planning is usually tightly
integrated with the annual budget
process
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Elements of tactical
planning
Project plans
Project budgets
Project reviews
Monthly reports
Annual reports
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Operational Planning
Deals with the day-to-day and week-toweek work routine
Focus is on routine operational tasks and
long-term projects
Primary goal is to communicate
In many organizations, people are asked to
do both
Weekly meetings are often used to
coordinate efforts and review progress
Weekly or monthly summaries are often
used to inform others
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Structure
The structure of operational planning is
closely related to organizational structure
In a traditional hierarchical organization,
team leaders usually assemble with a
senior manager on a regular basis to share
information
Additional periodic meetings are often
required to coordinate efforts with other
units
In a process-oriented organization, teams
are more ad-hoc in nature, so a mechanism
must be put in place to insure
communication
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KINDS OF PLAN
1. MISSION OR PURPOSE identifies
the basic function of the
organization
Defining specific task to be perform
2. GOALS AND OBJECTIVES are the
results or achievements toward which
effort is directed.
These two concepts represent not only the end
point of the planning but also the end toward
which organizing, staffing, leading and
controlling are aimed.
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KINDS OF PLAN
Cont.
Goals comprises mission and purpose
statements of the organization in a
wider perspective
Objectives are goals expressed in
concrete terms that are readily
measurable.
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KINDS OF PLAN
3. Strategies - involves a plan or a
series of maneuvers for obtaining a
specific goal
-can be defined also as the
determination of the basic long-term
objectives of an organization and the
use of course of action and allocation
of resources necessary to attain
these goals
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KINDS OF PLAN
4. Policies -
basically general statements that
guide or channel the thinking of managers in
decision-making
5. Procedures
are plans spelled-out in a
detailed manner in which certain activities must
be accomplished
6. Rules
are usually the simplest type which
spell out specific required action or non-action.
are regulations promulgated by the agency
governing conduct observed by employees without
specifying a time sequence.
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KINDS OF PLAN
7. Programs plans or schedules to be
followed
comprised goals, policies,
procedures, rules, tasks, assignment,
steps to be taken, resources to be
used and other medium necessary to
carry out one as a given course of
action supported by budget
8. Budget itemizes estimate of
expected outcome and expenses
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Characteristics of a
Good Plan
A well developed plan should:
1. Be precise and clearly-worded
objectives, including desired results
and methods for evaluation
2. Be guided by policies and /or
procedures affecting the planned
action
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Characteristics of a
Good Plan
3. Indicate priorities
4. Develop actions that are flexible and
realistic in terms of available personnel,
equipment, facilities and time
5. Develop (actions that are flexible) a
logical sequence of activities
6. include the most practical methods for
achieving each objective, and
7. Perv ades the whole organization
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PRINCIPLES OF
PLANNING
1. Planning is always based and focused on
the vision, mission, philosophy and clearly
defined objectives of the organization
2. Planning is a continuous process
provision for proper analysis would
indicate revision of flexibility to be done
to make it more effective
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PRINCIPLES OF
PLANNING
3. Planning be pervasive within the
entire organization covering the
various department, services and
the various levels of management
to provide maximal cooperation
and harmony
4. Planning utilizes all available
resources
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PRINCIPLES OF PLANNING
5. Planning must be precise in its scope
and nature it should be realistic and
focused on its expected outcomes.
6. Planning should be time-bounded
(e.g. with short and long range plans)
7. Projected plans must be documented
for proper dissemination to all
concerned for implementation and
evaluation as to the extent of its
achievement.
33
STEPS /PROCESS OF
PLANNING
1.
2.
3.
4.
5.
Forecasting or estimating the future
Defining the philosophy and objectives
Identifying strategies
Forsetting the time frame
Preparing the budget
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FORECASTING OR ESTIMATING THE
FUTURE
Forecasting -
helps manager look into the
future and decide in advance where the agency
would like to be and what is to be done in order to
get there.
With estimates, provide the basis for planning
Includes:
Environment in which the plan will be
executed
Who the client is their customs, belief, language,
dialect barriers. Public attitude and behavior, severity
of` condition or illnesses, the kind of care they will
receive.
The number and kind of personnel required
The necessary resources
35
DEFINING THE PHILOSOPHY AND
OBJECTIVES
The philosophy flows from the purpose or mission
statement and delineates the set of values and
belief that guide all actions of the organization.
It is the basic foundation that directs further
planning toward a mission.
Societies and organizations have philosophies or
sets of beliefs that guide their behavior which
called VALUES.
Values quality having intrinsic worth for a
society or an individual and identifies
individualism, the pursuit of self-interests, and
competition.
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DEFINING THE PHILOSOPHY AND OBJECTIVES
4 CHARACTERISTICS THAT
DETERMINE A TRUE VALUE :
1. It must be freely chosen from among the
alternatives only after due reflection
2. It must be prized and cherished
3. It is consciously and consistently repeated
(part of a pattern)
4. It is positively affirmed and enacted
IF A VALUE DOES NOT MEET ALL 4
CRITERIA, IT IS A VALUE INDICATOR.
37
DEFINING THE PHILOSOPHY AND OBJECTIVES
Individual values should not conflict
with the organization.
Manager should have a value system
consistent with the organization
All philosophies must be translated
into specific goals and objectives if
they are to result in action.
Thus, goals and objectives
operationalize the philosophy.
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DEFINING THE PHILOSOPHY AND OBJECTIVES
A goal may be defined as the desired result
toward which effort is directed.
it is the aim of philosophy.
Goals, much like philosophies and values, change
with time and require periodic reevaluation and
prioritization.
Objectives are similar to goals in that they
motivate people to a specific end and are explicit,
measurable, observable or retrievable and
obtainable.
Objectives however are more specific and
measurable than goals because they identify how
And when the goal is accomplished.
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DEFINING THE PHILOSOPHY AND OBJECTIVES
Objectives can focus either on the
desired process or the desired result.
Processed objectives are written in terms
of the method to be used, whereas resultfocused objectives specify the desired
outcome
Objectives should have a specific time
frame, be behaviorally stated, be
objectively evaluated, and identify positive
rather than negative outcomes.
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FORSETTING THE TIME FRAME
TIME MANAGEMENT is a technique
for allocating ones time through the
setting of goals, assigning priorities,
identifying and eliminating wasted time,
and using managerial techniques to reach
goals efficiently.
Nurse-leaders who learn to manage time
effectively will be more productive, in
both their professional and their personal
lives.
Taking time to plan time saves time.
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TIME MANAGEMENT
In some ways, time management is a
misnomer: what is managed is how time is
used.
In todays downsized health care
organization, the pressure to do more in
less time has increased.
Job enlargement occurs when a flatter
organizational structure causes positions
to be combined and results in mangers
having more employees to supervise.
42
Time Management
In a horizontal organizational structure few
formal channels for communication exist so the
time needed to communicate with staff increases.
Time can be used proactively and reactively
Proactive approach when energy is focus on
people and events over which the manager have
direct or indirect control
Reactive approach if majority of the managers
time is spent on what concerns him most about
other people and events that troubles him which
makes his efforts less effective.
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TIME WASTER
It is something that prevents a person
from accomplishing the job or achieving
the goal.
Common Time waster:
Interruptions such as telephone calls and dropin visitors
Meetings both scheduled and unscheduled
Lack of clear-cut goals, objectives, and
priorities
Lack of daily/weekly plans
Lack of personal organization and self
discipline
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Cont.
Lack of knowledge about how one spends
ones time
Failure to delegate, working on routine
tasks
Ineffective communication
Waiting for others, not using transition
time effectively
Inability to say no
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TIME ANALYSIS
The 1st step is to analyze how time is being used.
The 2nd is to determine whether time use is
appropriate to your role
( some time may be used in doing things that seem to
be busywork rather than activities that
contribute to a particular outcome)
Job redesign- places emphasis on ensuring that
time is spent wisely and that the right individual
is correctly assigned the responsibility for tasks.
Time Logs- useful in analyzing the
actual time spent on various activities.
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HOW TO MANAGE THE
MANAGERS TIME
1. Setting Goals it is establishing
ones own goals and time frames
Nurses are accustomed to setting both long and
short- range goals, although typically such goals
are stated in terms of what patients will
accomplish rather than what the nurse will
achieve.
Defining goals and time frames helps reduce
stress by preventing the panic people often feel
when confronted with multiple demands.
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Cont.
Goal-setting - helps to relate current
behavior, activities or operation s to the
organizations or individuals long-range
goals.
Without the future orientation, activities
may not lead to the outcomes that will help
achieve the goals and meet the ideals of
the individual or organization.
The focus is to develop measurable,
realistic, and achievable goals
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How to Manage Time
Determine priorities
Take into consideration both long-term and
shortterm goals as well as the importance and
urgency of each activity
Daily planning and scheduling
Prepare a to-do list (planned for workday or
workweek)
Flexibility must be a major consideration to
allow to deal with emergency and crises
Focus is not on the activities or events but
on the outcomes that can be achieved in the
time available.
49
cont.
Daily planning and scheduling
It is necessary to have a system to keep track
of regular schedules (should be used when
establishing the to-do list)
It should include calendar and files
(Calendar includes information on the
purpose, who will attend, time and place)
(Files are maintained by date so that they are
readily retrievable when needed)
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Cont.
Grouping activities and minimizing routine work
Work items that are similar in nature and
require similar environmental surroundings and
resources should be grouped within divisions of
the work shift.
Group routine tasks, esp those that are not
important or urgent, during the least
productive time
Pick a task that can be successfully completed
and save it for the end of the day. can reduce
a sense of overload and stress
Implementing the daily plan and daily follow-up
is essential in managing time
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Cont.
Personal organization and self-discipline
Managers must have clearly defined priorities
based on a well-defined, measurable, and
achievable objectives.
These objectives are often related to those of
many professionals, as well as to objectives of
patients and their families.
Managers must have the ability to say NO
Taking on too much work can lead to overload
and stress
Being realistic about the amount of work to
which the manager commit is an indication of
effective time management.
52
Cont.
Personal organization and self-discipline
Be assertive in communicating own needs to
others
A cluttered desk, working on too many tasks at
one time, and failing to set aside blocks of
uninterrupted time to do important tasks also
indicate a lack of personal discipline.
Managers should clean their desk, get out the
materials needed to complete the most highest
priority and start working on it immediately
FOCUS on one task at a time, making sure to
Start with a high-priority task.
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Time-saving techniques
Conduct inventory of the activities
Set goals and objectives and write them down
With the use of calendars, executive planners,
logs or journals, write what you expect to
accomplish yearly, monthly, weekly or daily
Break down large projects into smaller parts.
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Time-saving techniques
Devote a few minutes at the beginning of each
day for planning
Organize the work space so it is functional
Close the door when there is a need to
concentrate
Learn organization /manager can delegate
Develop effective decision making skills in the
agency
Make good use of the spare time
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Controlling Interruptions
Keep an interruption log on an occasional basis
this should show who interrupted, nature of
interruption, when it occurred, how long it lasted,
what topics were discussed, the importance of
the topics, and time-saving actions taken.
Analysis of these data may identify patterns that
can be use to plan ways to educe the frequency
and duration of interruptions
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Controlling Interruptions
Phone Calls
Phone calls are major source of interruption
To handle telephone calls effectively, the
managers must:
Minimize socializing and small talks
Plan calls
Set a time for calls
State and ask for preferred call times and the
purpose of the call
Voice-mail is and excellent way to send and receive
messages when real time interaction is not essential
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Controlling Interruptions E-mail
E-mail can enhance time management
or it can be a time waster
Checking email too often can waste
time
Set specific times of the day to
check e-mail
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Controlling Interruptions Drop-in Visitors
Managers should direct the visit by identifying
the issue or question, arranging an alternative
meeting, referring the visitor to someone else, or
redirecting the visitors problem-solving efforts.
Additional strategy remain standing after
greeting the visitors gracious yet obvious
enough to encourage a short visit
Arrange furniture the nurse manager whose
desk is arranged so that immediate eye contact is
made with passersby or drop-in visitors for
interruptions.
Encouraging appointments decreases
interruptions
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Controlling Interruptions Paperwork
Plan and schedule paperwork
Sort paperwork for effective processing
Send every communication electronically unless a
paper memo, report, or letter is required.
Analyze paperwork frequently review filing
policies and rules regularly, and purge files at
least once each year. Do not be afraid to
recommend changes, when possible, formats can
be revised if needed to.
Do not be a paper shuffler handle a piece of
paper only once, means each time a paper is
handled, an action should be taken to further
process it.
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Respecting TIME
The key to using time management techniques is
to respect ones own time as well as that of
others
People who respect their time are likely to find
others respecting it also
Reciprocate by respecting the time needs of
others
The effort to manage time is by: Determining
priorities, organizing the workday and minimizing
interruptions.
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BUDGETING
Budgeting is the process of planning and
controlling future operations by comparing actual
results with planned expectations
A BUDGET is a detailed plan that communicates
these expectations and serves as the basis for
comparing them to actual results
The budget show how resources will be acquired
and used over some specific time interval;
Its purpose is to allow management to project
activities into the future so that the objectives
of the organization are coordinated and met.
It helps ensure that resources necessary to
achieve these objectives are available at the
appropriate time
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BUDGETING
Managing a budget is a process of planning for a
specified time in the future, usually one year,
monitoring how well the plan is working during the
budget time period, and adjusting the budget
accordingly for the next budget cycle.
The budgetary process allows the manager to
visibly identify resource problems early and to
adjust them to changing situations.
Well-managed budget uses the organizations
resources to best provide quality patient care.
63
The Budgeting Process
Budget is a quantitative statement, usually in
monetary term, of the plans and expectations of a
defined area over a specified period of time.
Budget- provide a foundation for managing and
evaluating financial performance
Budget detail how resources (money, time,
people) will be acquired and used to support
planned services within the defined period of
time.
Budget purpose - allow management to project
action plans and their economic impact on the
future so that objectives of the organizations are
coordinated and met.
64
Budgeting Process
Increases the awareness of costs and also helps
employees understand the relationships among
goals, expenses, and revenues.
Budgets also help management control the
resources expended through an organizational
awareness of costs.
Budget performance provides management with
feedback about resources management and the
impact on the budget
65
Approaches to Budgeting
Cost Centers managers are responsible for
predicting, documenting, and managing the costs
(staffing, supplies)
Revenue Centers managers are responsible for
generating revenues (patient volumes)
Profit Centers managers are responsible for
generating revenues and managing costs so that
the department shows a profit (revenue exceed
costs)
Investment Centers managers are responsible
for generating revenues and managing costs and
capital equipment (assess)
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Incremental Budget
Incremental or line-by-line budget
each expense item or category is distributed in
a budget worksheet
Finance department distributes a budget
worksheet listing each expense item or category
on a separate expense line
Expense line divided into salary and nonsalary
items
Advantage simplicity of preparation
Disadvantage discourages cost efficiency
67
Zero-based Budget
An approach that assumes the base for
projecting next years budget is zero.
Managers are required to justify all
activities and programs as if they were
being initiated for the 1st time.
Advantage every expense is justified
Disadvantage time consuming and may
not be necessary
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Fixed or Variable Budgets
Fixed budgets- amounts are set
without regard to changes that may
occur during the year, such as
patient volume or program activities
Variable budgets- adjusted based on
changes in revenues, patient census,
utilization of supplies, and other
expenses
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Fixed or Variable Budgets
Budget that are categorized as fixed if the
budget amount are set without regard to changes
that may occur during the year, such as patient
volume or program activities, that have an impact
of the cost assumptions originally used for the
coming year
Variable budgets- developed with the
understanding that adjustments to the budget
may be made during the year based on changes in
revenues, patient census, utilization, and other
expenses.
70
Preparing the Budget
A budget is an annual operating plan, a
financial road map and plan which serves a an
estimate of future costs and a plan for
utilization of manpower, material and other
resources to cover capital projects in the
operating programs.
A budget is a plan for future activities
expressed in operational as well as financial or
monetary terms.
In a health care institution, this consists of 4
components:
1. revenue budget, an expense budget, a cash budget
and a capital budget
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BUDGET
REVENUE BUDGET SUMMARIZES INCOME
WHICH MANAGEMENT EXPECTS TO GENERATE
DURING THE PLANNING PERIOD
EXPENSE BUDGET DESCRIBES THE EXPECTED
ACTIVITY IN OPERATIONAL AND FINANCIAL
TERMS FOR A GIVEN PERIOD OF TIME.
CAPITAL BUDGET OUTLINES THE PROGRAMMED
ACQUISITIONS, DISPOSALS AND
IMPROVEMENTS IN AN INSTITUTIONS
PHYSICAL CAPACITY
CASH BUDGET REPRESENTS THE PLANNED CASH
RECEIPTS AND DISBURSEMENTS AS WELL AS THE
CASH BALANCES EXPECTED DURING THE
PLANNING PERIOD.
72
Revenue Budget
Represents the patient care income expected for
the budget period.
Revenue projections for the next year are based
on the volume and mix of patients, rates, and
discounts that will prevail during the budget
period.
Projections are developed from historical volume
data, impact of new and modified clinical
programs, shifts from inpatient to outpatient
procedures, and other influences.
Also taken into consideration are projected revenues
derived from Medicare, Medicaid, commercial insurance
companies, HMOs, and other 3rd party payers.
73
Cont.
Medicare payments for inpatient services
are made as a predetermined specific rate
for each Medicare recipient based on the
patients diagnosis
Care is classified into diagnosis-related
groups (DRGs).
Payments are made based on the assumption
that patients with the same DRG use similar
resources.
DRGs are based on primary and secondary
diagnoses, age and treatment received.
74
Expense Budget
Consist of salary and nonsalary items
Expenses should reflect patient care
objectives and activity parameters
established for the nursing unit
It is comprehensive and thorough;
taking into consideration all available
information regarding the next years
expectations.
75
Cost Centers
Nursing units bare typically considered cost
centers
A cost center is described as the smallest area
of activity within an organization for which costs
are accumulated.
Nursing managers are commonly given the
responsibility for costs incurred by their
department, but they have no revenue
responsibilities.
76
Profit Center
If manager is responsible for
controlling both costs and revenues
and if their financial performance is
measured in terms of profit (the
difference between revenues and
expenses) then the manager is
responsible for a profit center
77
Classification of Costs
Fixed costs costs that will remain the same for
the budget period regardless of the activity level
of the organization, such as rental payments and
insurance premiums.
Variable costs depend on and change in direct
proportion to patient volume and patient acuity,
such as patient care supply expenses. More
patient admitted, more supplies used, causing
higher supply expenses.
78
Classification of Costs
Direct Costs are expenses that directly
affect patient care.
Example salaries for nursing personnel
who provide hand-on patient care are
considered direct costs.
Indirect Costs are expenditures that a
are necessary but dont affect patient
care directly.
Example -Salaries for security or
maintenance personnel
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BENEFITS DERIVED FROM
BUDGETARY PROCESS
Budgeting stimulates thinking in
advance. It anticipates future
opportunities or problems and
prepares for them.
It leads to specific planning
Budget preparation stimulates action
and intercation
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Factors in Budget Planning (in
nursing)
1. Type of patient
2. Size of hospital and its bed capacity
3. Physical layout of the hospital, the size
and plan of wards or units, the Nurses
station, treatment rooms, etc
4. Personnel policies
5. Grouping of patients
81
Factors in Budget Planning (in
nursing)
6. Standards in nursing care
7. The method of performing nursing care
whether simple or complex
8. The method of documentation
9. Proportion of nursing care provided by
professional nurse and those given by nonprofessionals
10. The amount and quality of supervision
available and provided
82
Factors in Budget Planning (in
nursing)
11. Efficiency of job description and job
classification
12. Method of patient assignment
13. The amount and kind of labor-saving devices and
equipment; intercommunication systems
14. The amount of centralized service provided;
sterile supply central oxygen service; linen supply
15. The nursing service requirements of the ancillary
dept.: clinics. Admitting office, ER
16. Reports required by administration whether
s simple or complex
17. Affiliation of nursing students
83
Determining the Salary
(personnel) Budget
Salary Budget - also known as Personnel
budget projects the salary costs that
will be paid and charged to the cost center
in the budget period.
Managing the salary budget is directly
related to the managers ability to
supervise and lead the staff.
84
Benefits
FTEs or full-time equivalents are necessary to
replace personnel for benefit time (vacations,
holidays, personal days, and so on).
This factor can be calculated by determining the
average number of vacation days, paid holidays,
personal days, bereavement days, or other days
off with pay that the organization provides and
the average number of sick days per employee as
experienced by the cost center
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Determining FTEs
required for replacement
Determine hours of replacement time per
individual
Then determine FTE requirement
Benefit Time Hours/Shift
Replacement Hrs
15 vacation days x 8 hours
=120
8 holidays
x 8 hours = 64
4 personal days x 8 hours = 32
5 sick days
x 8 hours = 40
total
= 256
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Cont.
Divide replacement time by annual FTE
base
256 / 2,080 = 0.12
From the FTE calculations an FTE budget is
calculated
This budget provides the base for the salary
budget
However the shift differentials, overtime, and
bonuses or premium also may affect budget
performance and need to be considered
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Capital Budget
This budget identifies physical renovations, new
construction, and new or replacement equipment
planned within a specified time period.
Limited to a specified amount and decisions need
to be made how best to allocate available funds
The nurse manager is responsible for assisting in
selecting and determining the amount of
equipment needed.
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Future Trends
A major trend in financial management of health
care organizations is the shift from a revenuebased to a cost-based accounting system.
With the shift to managed care, the focus is
decreasing the cost to maintain adequate profit
margins in an era of diminishing compensation.
This trend has serious implications to nursing
Nursing has always been considered a cost, not a
source of revenue. It is a challenge to be
consistently cost conscious and to measure,
manage and document nursing cost-effectiveness
in this financial environment.
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