Budgeting Basics and Beyond

21.5. Ranking Proposals

In ranking proposals, upper management will rely heavily on the recommendations made by managers who have a keen knowledge of their decision units. Quantitative and qualitative factors must be considered. A cost/benefit analysis should be performed for each decision unit.

The ranking of decision packages goes in the order of decreasing benefit. The manager must identify those products or services that are the most crucial. The highest priority should be assigned to the minimum increment of service below which the unit cannot operate effectively.

Top management performs the final ranking after obtaining initial recommendations of managers within the company 's divisions, departments, and cost centers. If a manager's recommendations are rejected, he or she should be notified why.

A dollar cutoff must be established for programs depending on budgetary constraints. For example, an 80 percent cutoff may be set, so if the programs total $ 1 million, only $ 800,000 is in available funds. The manager should also rank nonfunded packages, in the event that additional funds become available at a later date.

A low-priority item may later become a high -priority one because of changed circumstances. For example, the political climate may change due to a new legislature, governor, mayor, or president. Priorities may change during the year, so adjustments may be necessary.

Different ranking techniques may be used, such as single standard, voting, and major category. Single ...