Budget Process and Performance Appraisal at Al Baraha Hospital

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Introduction

Budgeting and performance appraisal is very important administrative processes. The processes obligate the managers to formulate sound decisions that influence the productivity of the organization. This paper will give a stringent analysis of the budgetary and performance appraisal processes in Al Baraha Hospital. It will compare the local practices in the hospital with the best practices in theory, and give suggestions for improvement.

Budget

A budget is a very essential tool in any organization, as it gives a clear outlay of the anticipated income and expenditures for a given financial year. A budget will give a clear outlay of all the anticipated financial activities and the corresponding amount of money set aside for each activity (Alesani 2012). Budgets are indispensable tools in any organization that intends to prosper and increase its productivity levels.

Purpose of budgeting

The main purpose of budgeting is to make the best use of the scarce resources available. Budgeting enables the managers to avoid excessive spending, which may cause deficits in some operations of the organization. Budgeting enables managers to know the progress of the organization. An increase in revenue is a clear indication that an organization is advancing and it may attain more profits than before. The hospital managers will be able to make plans of achieving higher efficiency levels through budgeting. Most importantly, budgeting enables the managers to detect possible problems and address them accordingly before they affect the organization.

The budget process

The first thing in budgeting is studying the financial trends of the organization. An upward trend implies that the organization is realizing some profits and it needs to keep up with the work spirit and expand its production lines. A downward or irregular trend implies that there is a problem that needs to be addressed. After understanding the financial position of the organization, the manager, the finance director, and other executives can meet and trade-off with the available alternatives. Everyone gives suggestions, improvement plans, scripts of the anticipated budget, and justifications for every proposed decision. The team will then identify the best actions to take, the best time to take the actions, and the best ways to act. Thereafter, the finance director should formulate a budget from the minutes of the meeting. The executives of the organization will review and approve the budget.

Best practices in budgeting

As indicated, budgeting is a process that tries to foresee the plans of an organization. Therefore, it is important for the executives of the organization to ensure that the budget contains items and actions that give clear visibility of the organization. The driving force for the entire budgetary process is the growth and dynamicity of the organization. Enlisted below are some of the best practices in budgeting.

Budgeting should be a transparent process that considers the decisions of every stakeholder of the organization. It ought to be a holistic process that enables the stakeholders to review the financial statements of previous years and make proposals for corrections and amendments (Carlitz 2013).
Budgeting should always have an allocation to obtain new technological equipment for the organization to be at par with the evolving world.
Budgeting should have clear and achievable forecasts. The values indicated for every item in the budget should be realistic. They should display the intelligence of an economist in allocating scarce resources. There should be a specific budget model to guide the entire budgeting exercise, and there should be a provision for risks and uncertainties.
Budgeting should adhere to the organization’s visions. Every new item in the budget ought to be having a positive contribution to the company.
Lastly, the entire budgeting process should follow the rightful procedure of estimating the revenue, formulating the budget from previous budgets, arranging for budget hearings, approving the budget, adopting the budget, executing, and amending the budget if necessary.

Problems of setting and managing budgets

The main problem in formulating a budget is the lack of adequate time and resources. It is very expensive for an organization to have its economists who are very vital in developing the best budgets. Moreover, it would be difficult to follow the rightful procedures in formulating and managing the budget because of the work pressures, possible risks, and uncertainties (Radu 2011).

Local budget setting

Al Baraha Hospital employs a traditional budget setting that focuses on operational expenses, wages, and developmental projects. The hospital obtains its revenue from the registration fees of the patients, sale of drugs, payments received from inpatients and outpatients, health insurance companies, lease of premises, and funds obtained from the government. The hospital spends its income on purchasing drugs and equipment, maintaining hospital equipment, purchasing foodstuff, and paying casual workers. Other than funding the hospital’s major projects, the government pays the permanent employees and supplies some drugs to the hospital.

Al Baraha Hospital employs a scanty budget process. The managing committee and the finance manager define the goals, and they formulate the expectations before creating the budget. After implementing the budget, they monitor the outcomes and analyze the variances to come up with the amendment decisions. This is as shown in the diagram below.

Critique of the local budget and suggestions to improve it

It is evident that the local budget at Al Baraha Hospital is scanty as it involves very few stakeholders of the organization. Therefore, it would be advisable for the hospital to invent ways of involving the employees. It would be advisable to have a budget call, where the budget director, manager, and employees’ representatives give their recommended budgets. Thereafter, there should be a budget-hearing day for all the stakeholders of the company. The decisions and suggestions of the stakeholders will determine the areas to amend. Finally, the executive body can approve the budget and allow the hospital to implement it in the subsequent year.

Performance appraisal

This is the systematic approach of analyzing employees’ performance in the workplace. Performance appraisal works towards performance improvement, as employees are motivated to work hard and produce efficient results.

Purpose of performance appraisal

Performance appraisal has the key role of reviewing the performance of employees and identifying loopholes in the daily operations. It enables the managers to identify the most efficient employees, reward them, and motivate the weak employees to upgrade their performance. Any organization that aims at achieving optimal productivity must employ the best practices in performance appraisal.

Best practices in performance appraisal

Performance appraisal should be an ongoing process throughout the year. The manager ought to monitor the employees and dialogue with them in a calm manner that does not raise suspicion. An annual appraisal form is a tool that the managers should avoid at all accost as it leads to misunderstanding. Instead, the managers should develop daily objectives that the employees in the hospital should attain. The daily expectations of the employees will become habitual, and employees will not have to strain at certain times of the year to please the manager. The manager should develop a strategy of delivering employee performance reports on a regular basis. The most important thing that managers should consider is justice; therefore, all performance reports should be fair (Jacobs, Belschak & Hartog 2014). The manager should create a documentary that contains the rules and regulations that govern the organization. Every employee should have a defined set of responsibilities to handle in the organization. The manager should insist on teamwork, and most importantly, there should be incentives for the best-performing employees in a consistent and impartial manner (Selvarajan & Cloninger 2012).

Benefits and problems in performance appraisal

Employing the best performance appraisal measures generates positive results for the company. Employee performance improves, and the productivity of the organization increases considerably (Dusterhoff, Cunningham & MacGregor 2014). The greatest challenge in establishing a performance appraisal is the negative perception of the employees. Most employees will avoid performance related tasks for confidential reasons (Pichler 2012). In many cases, employees feel as if their employers are not grateful for their hard work whenever annual appraisal forms are used in evaluating performance. Finally, the entire appraisal exercise is time-consuming and managers may lack sufficient time to carry out efficient performance measures due to the work pressures.

Local performance appraisal practices

At the Al Baraha Hospital, the immediate bosses take the responsibility of measuring employees’ performance. The hospital uses an annual performance tool that the bosses have to fill regarding a particular employee. Employees with poor performance records have to explain their mischievousness to the director. Moreover, customer satisfaction surveys give reports that determine whether the customers are satisfied with the healthcare services offered in Al Baraha Hospital. In case the customers complain about the services of a particular employee, the immediate boss takes the necessary disciplinary action. Al Baraha Hospital has a defined set of rules and conducts that the employees have to espouse in every procedure. Failing to adhere to the set rules leads to disciplinary actions such as suspension or retrenchment of the employee.

Critique of the local practices and suggestions for improvement

It is noteworthy that the managers of Al Baraha Hospital are too strict. Firstly, relying on the annual performance reports of the immediate bosses is an erroneous way of measuring employee performance. The immediate boss might have ill motives towards an employee, and the report may have some prejudices. The manager should meditate and emphasize attaining daily objectives instead of relying on annual performance reports (Saffie-Robertson & Brutus 2014). It is necessary to do develop a strategy of delivering employee performance reports on a regular basis to keep employees on their toes. The manager should emphasize teamwork, openness, personal responsibility, and accountability to enhance performance. Lastly, the manager should develop ways of appreciating best-performing employees by offering incentives.

Conclusion

From the discussions, it is clear that budgeting and performance appraisal determines the level of output of an organization. A clear budget is necessary for planning and enhancing performance. To improve the output, it is necessary to ensure that the employees are satisfied with their workplace. Therefore, the manager of Al Baraha Hospital should drop the outdated practices to outshine other healthcare service providers and adopt the best budgetary and performance appraisal practices.

References

Alesani, D 2012, ‘Rethinking budgeting as a continuous process’, Public Administration Review, vol. 72, no. 6, pp. 885-886.

Carlitz, R 2013, ‘Improving transparency and accountability in the budget process: an assessment of recent initiatives’, Development Policy Review, vol. 31, no. 1, pp. 49-67.

Dusterhoff, C, Cunningham, J, & MacGregor, J 2014, ‘The effects of performance rating, leader-member exchange, perceived utility, and organizational justice on performance appraisal satisfaction: applying a moral judgment perspective’, Journal of Business Ethics, vol. 119, no. 2, pp. 265-273.

Jacobs, G, Belschak, F, & Hartog, D 2014, ‘Ethical/ unethical behavior and performance appraisal: the role of affect, support, and organizational justice’, Journal of Business Ethics, vol. 121, no. 1, pp. 63-76.

Pichler, S 2012, ‘The social context of performance appraisal and appraisal reactions: A meta-analysis’, Human Resource Management, vol. 51, no. 5, pp. 709-732.

Radu, M 2011, ‘The budgetary process: reason for dissatisfaction’, Annals of The University of Petrosani Economics, vol. 11, no. 4, pp. 255-262.

Saffie-Robertson, M, & Brutus, S 2014, ‘The impact of interdependence on performance evaluations: the mediating role of discomfort with performance appraisal’, International Journal of Human Resource Management, vol. 25, no. 3, pp. 459-473.

Selvarajan, T, & Cloninger, P 2012, ‘Can performance appraisals motivate employees to improve performance? ‘, International Journal of Human Resource Management, vol. 23, no. 15, pp. 3063-3084.

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