Parkinson’s Second Law and Church Budgets
In the article, “Church Staffing Levels – Getting It Right,” we examined the effect of Parkinson’s First Law, “work expands to fill the time allotted” and its application to church staffing. A corollary is Parkinson’s Second Law, “expenditures rise to meet income,” a law that has application to church budgets and expenditures.
Northcote Parkinson’s satirical look at industrial and government bureaucracies in his book, “The Pursuit of Progress,” describes conditions that lead to increasing costs. Parkinson’s Second Law applies to both individuals and organizations. Most of us can relate to the experience of receiving an increase in salary and immediately finding a way to spend it. In business and in churches, we see this law illustrated when revenues and offerings are increasing. Everyone sees this as an opportunity to increase their budgets. And, in local, state, and national government we see an increase in tax revenues seems to be absorbed without a significant increase in products and services.
The problem Parkinson’s Second Law identifies is that typically costs increase without a commensurate increase in productivity, efficiency, or effectiveness. Inputs increase without an increase in output. Additional revenue is absorbed into the organization without producing a clear benefit, typically due to a lack of strategic thought to its allocation. This happens most frequently in churches when every ministry and department receives the same across the board increase in their budgets.
On the surface this appears to be an easy, fair and equitable way to distribute budget increases. Yet, absent of a process that requires staff to justify additional budget requests and vetting criteria that defines church and ministry strategic priorities, budget increases disappear into a black hole. The outcome is “budget creep” where church budgets are going up but there are no measurable or meaningful results associated with those increases.
Parkinson’s Laws result in a form of reverse or negative synergism. Synergism is where the output exceeds the sum of its parts due to the effective and efficient integration of the various inputs. Parkinson’s Laws illustrate the inevitable pull in organizations toward the addition of unnecessary work, employees, and expenses that increases ineffectiveness and inefficiencies.
The solution is an awareness of this organizational tendency and prioritizing rigorous programs of cost monitoring, control, and reduction during good and bad financial years. Some examples include:
- Intentionally under budgeting anticipated revenue. Not only does this curb unchecked spending it provides surpluses to apply to big ticket capital expenses, vision related initiatives, and new missional opportunities.
- Avoid across the board percent or dollar increases to ministries and operations. Require each ministry and department to justify increases based upon numerical growth, inflation, or strategic value. Require staff to prioritize their requested increases.
- Rather than arbitrarily increase ministry budgets, establish ministry contingency accounts for new or expanded initiatives that require supervisor approval to access.
- Require staff to present a budget that reflects a 50% decrease in order to identify that which they determine are “mission critical” expenses.
- Zero base your church budget. If not annually, at least every 3-5 years.
- Establish maximum spending levels before supervisor approval is required.
- Implement a Purchase Order system.
- Establish vetting criteria for new ministry funding requests.
- Increase participant fees.
- Rebid vendor contracts every 2-3 years.
- Take advantage of technology advances to reduce costs, such as LED lights, new printers, and computer monitored HVAC systems.
- Explore reducing costs through outsourcing housekeeping, maintenance, landscaping, food service, payroll, accounting, IT, printing, etc.
- Limit the number of special events. Combine programs. Reduce frequency of regular programs.
- Establish a one year moratorium on out of state conferences, T-shirts, snacks, etc.
- Provide merit based rather than across the board salary increases.
- Provide one time bonuses rather than salary increases.
What would you add to this list?
Posted on February 27, 2018