Austerity affects the entire public sector and finances can be scarce for everyone, but savvy organisations are using outcome-based budgeting (OBB) practices to better allocate and prioritise those precious resources. Discover what OBB is all about, how it works and how you can harness it to deliver serious advantages.

What is outcome-based budgeting?

There are several types of outcome-based budgeting (OBB), with the most common being a system of budget setting that specifically allocates scarce financial resources to achieve priority outcomes. This approach gives organisations a direct link between how forecast expenditure is prioritised and the outcomes realised by that spend.

OBB and outcome-based accountability (OBA) are ways of using performance and financial data to:

• Systematically monitor the delivery of services
• Develop budget plans that to show how spending makes a difference and how it's
• essential for demonstrating the delivery of strategic plans

The advantages of outcome-based budgeting

OBB helps organisations understand how people and resources are being used and helps leaders make decisions based on a single version of the truth and understand the cause and effect across the organisation.

It supports "informed challenge" – meaning that decision makers are armed with "Grade A" evidence to help them reform services based on this improved understanding rather than having to re-size or discontinue those services when there are alternative options available.

This allows organisations to better identify and invest in priority services and develop alternative operating models for lower-priority areas, thus improving efficiency and helping financial colleagues establish more focused cost-benefit analyses to glean the best possible value for every pound that's spent.

Performance Management with outcome-based budgeting

Organisations usually have a dizzying array of performance measures that focus on outputs rather than outcomes (e.g. how many calls were answered). But while this is useful business intelligence, it doesn't really leave anyone any better off. OBB gives organisations a rational reason to change this stagnant approach and focus their efforts (and their performance management framework) on something meaningful that can be used to support evidence-based decision making.

How can organisations use InPhase to implement outcome-based budgeting?

When adopting an OBB approach, the starting point is determining the outcomes that the organisation wants to achieve. These outcomes are usually set out in the strategic priorities of the organisation.

InPhase’s "cause and effect" widget allows organisations to create an outcomes and priorities framework to which measures, actions and documentation can be associated. By identifying the specific service activities and key performance indicators that are linked to an outcome, organisations can analyse how they've prioritised their use of resources. It can then be easier to judge whether resources need to be re-prioritised to help improve outcomes.

Our versatile reporting engine allows the creation and delivery of an unlimited array of reports to communicate OBB information, bringing together finance, data, performance, action planning and risk in a holistic way through an easily digestible format – whether in a single dashboard view or a through collection of reporting pages in a single (or multiple) briefing books.

What outcome-based budgeting means for you

Outcome-based budgeting is a proven means of increasing financial transparency and accountability in the public sector. Continued austerity has forced many organisations to "cut their cloth" year on year - particularly in the public sector - and in many cases these cutbacks have begin to eat into financial reserves. It's a dangerous game and not one that makes for a viable, long-term strategy.

It's time for organisations to tackle their financial burdens from a different angle by considering what they're doing, why they're doing it, who they're doing it for, and for what benefit. These days it's increasingly important to shift away from activities that just deliver "business as usual" to those that deliver an outcome and priorities-led approach.

Gareth Payne

Senior Consultant

Gareth is one of our Implementation Consultants. He has a wealth of experience in the public sector, particularly local authority where he spent 18 years delivering on policy, citizen engagement and performance management in the West Midlands.