I think we’ve made a lot of progress during the past year, but we’ve got a great deal left to do and time is running out. If we don’t have some results to show within the next six months, the future of the project is in serious jeopardy. By the end of next month we’ve got to decide on the adequacy of our decision packages and how we wish to deal with the cost information for the budgets.
BACKGROUND
The speaker was Dr. Marzio Scheggi (pronounced Skay-gee) Director of the Zero-Base Budgeting Project of the Centro Italiano Sviluppo. He was referring to a € 5 million experimental project in zero-base budgeting (ZBB) that involved 10 local health units situated in 4 regions of Northern Italy. Financed by the Italian government, with the largest grant ever made in Italy to a private organization, the two-year project had begun about two years ago.
The ten local health units participating in the ZBB Project had been chosen on the basis of several criteria, including their locations, the types of services and programs they offered, and their willingness to experiment with some new management tools. LHUs, as they were called, had responsibility for all health services within a relatively small geographic region, covering anywhere from 50,000 to 200,000 people. They reported to the regional office of the Ministry of Health, and generally comprised at least one hospital and several primary care facilities (there was one primary care facility for approximately every 10,000 people). They also offered a variety of programs and services, and supervised all community pharmacies in their geographic region.
Project Organization
Dr. Scheggi was one of several project directors in the Centro Italiano Sviluppo, a private consulting firm headquartered in an old villa located in Monteviale, a small town outside of Vicenza in Northeast Italy. Dr. Scheggi had assembled a staff of six professionals, two of whom also were researchers at the University of Venice, located about an hour east of Vicenza. In addition, he had the advice of a Scientific Committee, comprised of some of Italy’s best known consultants and academics in the fields of management control and public administration. An organization chart for the project is contained in Exhibit 1.
As Exhibit 1 shows, four members of Dr. Scheggi’s team were responsible for seven of the 10 LHUs. The remaining LHUs, located in the region of Emilia Romagna, were the responsibility of a research team from the University of Bocconi in Milan. The head of this research team, Professor Elio Borgonovi, who was a member of the Scientific Committee, reported to Dr. Scheggi
Within each LHU there was a data analyst, assigned specifically to the ZBB Project. This person worked closely with the members of Dr. Scheggi’s staff assigned to that LHU, and was responsible for maintaining the continuity of the project within the LHU.
Assignment
- Evaluate the decision packages for the four DMUs discussed. What changes, if any, would you recommend? How, if at all, would you modify Exhibit 2 to incorporate these changes?
- What is the relationship between costs and decision packages? How, if at all, would you modify Exhibit 2 to incorporate this relationship?
- How would you prepare a budget for each of the four DMUs described in the case? Please be as specific as you can.
- Using the information gained by Dr. Scheggi in his interviews, and the analysis you have conducted with the first three questions, what are the key elements of a ZBB methodology that would be consistent across all LHUs? Please be as specific as you can: exactly what information should Dr. Scheggi’s staff collect from the remaining DMUs? Design a data collection instrument that could be used to gather this information?