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Based on Lawler's (1986) work, it has been found that organizational effectiveness and productivity improves when four key resources are decentralized within the organization: power, information, knowledge, and rewards. In the context of school-based budgeting, the high involvement framework implies that schools need "real" power over the budget to make allocation and expenditure decisions; fiscal and performance data for making informed budget decisions; professional development and training for the budget process so that people at the school site will have technical knowledge to do the job; and control over the compensation system to reward performance. In this section we review previous research on decentralized management and school-based budgeting by applying the high involvement framework. Our analysis, therefore, is structured around the following four questions:
Lawler's (1986) work suggests that school-based budgeting would entail allocating most of the budget to schools in a lump-sum and then empowering key stakeholders at the site -- the school site council, the principal, and teachers -- to make budget decisions (Wohlstetter & Mohrman, 1993). Research in schools further indicates that sites need flexibility with the budget, so that school-level participants can make changes to the instructional program, such as the ability to decide the mix of personnel. In Hannaway's (1993) research of two school-based managed districts, principals cited budget flexibility as a critical ingredient for effectively addressing school-specific problems. Research conducted by Brown (1990) also supports the importance of budget flexibility. In his study of centralized districts, one of the primary complaints of principals was that they did not have the flexibility to acquire the resources they felt they needed to competently do their job. A report by the U.S. General Accounting Office (1994) found that schools were able to meet needs as they arose when they had the flexibility to make changes in their budgets.
The literature on school-based budgeting suggests four major areas of authority that need to be shifted from the central office to the school site in order to provide school-level participants with the power and flexibility to improve school performance (Hentschke, 1988; Wohlstetter & Buffett, 1992). The first area is authority over the mix of professionals at the school site. This includes control over the recruitment and selection of staff as well as the ability to decide the number of part-time and full-time faculty; the mix of professionals and paraprofessionals; and the combination of faculty responsibilities, such as in-class and resource duties (Wohlstetter, Smyer, & Mohrman, 1994). Traditionally, the central office has dictated the quantity and mix of professionals in schools. Previous research in districts with school-based budgeting (Wohlstetter & Buffett, 1992) found some evidence of a power shift: schools were usually given the flexibility to determine the experience levels of teachers, but were not able to control the number or types of positions.
A second area of budgeting power is the extent to which schools control expenses related to substitute teachers and utilities (Hentschke, 1988). This includes the ability to accrue savings from these accounts as discretionary funds at the school site. In centrally managed districts, the district office pays for utilities and provides substitute teachers on an as-needed basis. Thus, if schools work to conserve energy by turning off lights after school hours or reduce teacher absenteeism, they do not gain any financial rewards for their efforts. Proponents of school-based budgeting argue that if such expenses were under school control, staff would become more aware of the costs and more efficient in their use of these resources.
The third area of authority is control over the source of supply (Hentschke, 1988; Murphy, 1991). In traditionally managed districts, the district office provides services and supplies to schools and often it is the district, not the school, that decides when they are needed. Under school-based budgeting, schools have the authority to purchase services and supplies from either the district or an outside vendor when the school decides they are needed. Brown (1990) predicts that if schools were given this authority, there would be less of an urge to hoard supplies. Past research of districts with school-based budgeting suggests that central offices have been reluctant to fully devolve this authority to schools, however. Wohlstetter and Buffet (1992) found, for example, that even when schools were allowed to make purchases outside of the district, central office policies were sufficiently restrictive to provide a strong incentive for schools to use district providers.
Finally, the literature on decentralized management suggests that school-based budgeting should allow individual schools to carry over unspent money from one year to the next (Hentschke, 1988; Murphy, 1991). In centralized districts, any unspent money reverts to the district office. Such a policy often pushes schools to make poor expenditure decisions and order nonessential items just so that all of the money is spent on time (Brown, 1990; Prasch, 1990). In decentralized districts, Wohlstetter and Buffett (1992) found that most of the districts they studied allowed money to be rolled over into the following year and, further, that the money became discretionary regardless of its status the previous year, which ultimately helped schools with long-term planning.
In sum, the literature suggests that when power over the budget is decentralized, schools would need to receive lump-sum budgets. School-based budgeting would also entail shifting authority from the central office to allow schools to determine the mix of professionals; how to spend or save money for substitute teachers and utilities; the source of supply; and how to spend unused funds.
In the private sector, Lawler (1992) found that information needs to accompany power in order for departments and work teams to be able to make good decisions. Indeed, according to Lawler (1992), "effective communication of financial and strategic information is a primary responsibility of senior management" (p. 208). This information might include revenues and costs disaggregated to the department and unit levels, timelines, production reports, and customer satisfaction results. Lawler (1992) suggests the use of technology, particularly electronic mail, as one way to speed up the collection and dispersal of this information.
Similarly, schools need to receive the information necessary for making decisions about how to create and plan a budget, how to allocate dollars, and how to monitor the budget. Brown (1991) recommends that schools be provided with a district handbook to guide staff members through the budget planning process. This handbook might include district goals to guide the budget process; a planning timetable for the upcoming year; district allocation processes used; costs, such as personnel and services, to be incurred at the site; and the budget format to be followed. In addition, on-going monitoring of the budget needs to occur throughout the year. School personnel need continuous access to the status of their accounts, including monthly information about revenues and expenditures relevant to the budget by object, function, and program, so that they can participate in budgeting decisions effectively (Prasch, 1990). An on-line, interactive computer network would give schools ready access to such fiscal information (Wohlstetter & Mohrman, 1993) and could provide an electronic invoice and purchase ordering system. Knight (1993) found that information technology also can be utilized to model the financial costs of alternatives.
Other types of information that would be useful to schools with school-based budgeting include comparative data about other schools' budgeting activities/processes, survey data from parents and other community members about school priorities and performance, and student achievement and personnel data. Such information could be used to inform the budget development process by clarifying student needs and by providing useful school-based budgeting models (Brown, 1990; Wohlstetter, Smyer, & Mohrman, 1994).
The high involvement approach suggests that power and information combined with a lack of knowledge of how to do the tasks assigned produces inefficiencies in organizational performance. Lawler (1992) describes two types of training activities that are needed to build this knowledge base in the private sector. The first type is technical training so that members of the department or work team have the skills to take on the tasks that are required of them. According to Lawler (1992), this training may need to be provided for as long as six to ten years depending on the complexity of the tasks. Interpersonal and team skills, or process skills, are the second type of training. This training, which may be provided by a supervisor, should be continued until the team has reached maturity and can last as long as two to four years.
Research in schools supports Lawler's (1992) findings that knowledge needs to accompany power and information. Prasch (1990), for example, found that staff members resisted change when school-based budgeting policies were adopted without providing training in the use of a new accounting system. In the high involvement framework, professional development specifically designed to build capacity for the budgeting process is critical. Based on the high involvement framework, implementation of school-based budgeting would include two types of knowledge development. First, participants need technical training designed to build managerial knowledge, such as training in program budgeting and fiscal accounting (Wohlstetter & Mohrman, 1993). Second, school-based budgeting participants need to be provided with process training in teamwork skills and the like, since work groups are often created at the school to handle financial decisions. Brown (1991) found that "an important element in the development of the budgeting process is the need to train participating personnel in their new roles that involve planning how money will be spent" (p. 67-68).
In addition to being trained for their new roles and responsibilities, the acquisition of knowledge needs to be an on-going, continuous activity (Wohlstetter & Briggs, 1994; Wohlstetter & Mohrman, 1993). Little (1989) found that staff development was often fragmented in content, form, and continuity. A school's financial environment is highly complex and often unstable; and membership on the school site council is likely to change. Therefore, participants in the budgeting process need to be provided with continuous professional development activities so that they can effectively adapt to changes in the environment and in school performance. According to Lawler (1992), these activities may need to last as long as ten years depending on the complexity of the budget process and how long it takes the budget team to reach maturity.
Lastly, Lawler (1992) proposes that employees in the private sector need to be rewarded for demonstrated skills and performance in order for an organization to achieve and maintain high performance. Budgeting might be one skill block in a skill-based pay system that would reward individual employees for the number and types of budgeting tasks they could perform. Employees may also be awarded bonuses for group performance. These pay-for-performance programs include gainsharing and profit sharing (Lawler, 1992) that require control over budget allocations and expenditures.
In terms of school-based budgeting, schools need the authority to control faculty and staff compensation. Applying a high involvement approach, teachers would be paid on an individual basis for what they know and can do, and as a group for improved performance (Wohlstetter & Mohrman, 1993). On an individual level, as teachers took on the new tasks required of them in a decentralized management system, they would be compensated for demonstrated acquisition of the knowledge and skills needed to discharge these responsibilities, such as budget management and scheduling (Firestone, 1994). Groups within the school would also be compensated for improved performance. Schools, for example, might reward members on a budget task force for balancing the budget or accruing savings. Firestone (1994) cautions, however, that this process would have to be designed to ensure that savings are not realized by undermining the educational programs of the school, such as through under ordering supplies.
In sum, staff could be compensated on an individual basis, particularly if one person is charged with the responsibility for monitoring the budget, and on a group basis for budget development and planning. Such an approach entails moving away from the current policy of rewarding teachers for years of education and experience.
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[Part 3: What Are the Budgeting Practices in Effective Site-Based Managed Schools?]