Budgeting for Outcomes: A Better Process for Better Results City of Stoughton, WI December 16, 2010
Topics What is Budgeting for Outcomes? How is BFO different from traditional
budgeting? How does the BFO process work? Discussion: Customizing BFO for Staughton
What is Budgeting for Outcomes? ď Ž BFO is a step-by-step budget development process
that begins with a small number of community-based priorities and enables governments to align programs and funding with those priorities ď Ž This process replaces traditional incremental, department-by-department budgeting ď Ž BFO provides a strong foundation not only for better allocating scarce resources, but for managing resources throughout the year because it affects all phases of the cycle: planning, budgeting, management and assessing results
How is BFO different from traditional budgeting? It’s more strategic – it begins by asking what the community
needs; not with last year’s budget It’s more evidence-based – BFO discussions focus more on evidence of the link between programs and priorities, less on the cost of continuing services Departments prepare program requests and explain links to achieving high level priorities. BFO’s methodology addresses key limitations of incremental budgeting
Dollars aren’t clearly linked to priorities at the very beginning of the process Near total focus on cost, not value (price) Department-by-department budgeting often is the source of disconnect between overall goals and what gets funded
Some limitations of department by department budget Departments are focused on executing programs well; need
also to show how programs serve overall goals
Traditional departmental budgets tend to focus first on
departmental concerns, second on organization-wide priorities
Departments often “own” issues and “own” a base budget
Priorities often seen as synonymous with a department’s name (e.g., public health) A department-by-department budgeting process makes cross departmental collaboration and innovation difficult Anything new is considered an “add”; less focus on programs that already exist Departments are in competition for funding – little incentive for cooperation
BFO versus Traditional Budgeting BFO compared to Traditional Budgeting Traditional
BFO
Focus
Add to or cut departmental “base budgets�
Fund programs and activities that support priorities and strategies
Budget requests
Departments ask for amount that can be justified based on ongoing activities (plus a little extra)
Results for a price (value): Departments propose programs likely to produce desired results, efficiently
Budget office job
Find places to cut, balance the budget
Test the logic of proposed solutions, provide efficiency tools, Balance the budget
BFO compared to Traditional Budgeting Traditional
BFO
Budget debate and discussion
What can we cut to balance the budget?
How to we spend revenues we have to get the best results? Are there better ways?
Decision drivers
Avoiding pain, being fair (to internal stakeholders) and getting it done
Getting better results for the community, based on evidence of effectiveness
BFO offers a methodology that mitigates problems inherent in traditional budgeting A change from direction to cut costs and
achieve community goals to providing a structured process for doing so Including many more employees in meaningful “thinking” roles, not just filling out forms Over time, creates a true “learning organization”
BFO has helped governments in tough times City of Savannah, GA
Implemented BFO not expecting a budget gap but used it to address an unexpected 4 to 7% shortfall
State of Iowa
Used Budgeting for Outcomes to close an approximate $350 million budget gap
City of Azusa, CA
Faced a 10% gap between expected revenues & costs in general fund budget of $29 million
Polk County, FL City of Baltimore, MD Mesa County, CO Quinault Indian Nation, WA Other governments, such as Boulder, CO, have adopted priority-based budgeting processes similar to BFO
BFO has been implemented in all types of governments States
Washington Iowa South Carolina Michigan Louisiana Dept, of Culture, Rec & Tourism Oregon Dept. of Education Manitoba
Cities
Counties
School Districts
Jefferson County, CO Billings, MT
Redmond, WA Spokane, WA Tacoma Metro Parks Azusa, CA Savannah, GA Dallas, TX Ft. Collins, CO
Snohomish, WA. Multnomah, Oregon Mesa County, CO Polk County, FL
BFO has had unanticipated positive consequences* New leaders emerged The level of discussion and debate in the organization was
elevated Finally linked performance measures directly to results Built tremendous capacity throughout the organization Level of understanding and cooperation between departments increased substantially Elected officials felt much more involved in budget process
*These came from Savannah’s own evaluation of its process.
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Benefits of a BFO Process Pushes lower-value spending out of the budget,
moves high value to top of list Focuses on results, not budget inputs or programs in isolation from government-wide context Enables managers to better make the case, explain how spending is linked to results, the logic of their offers (activities and programs) Produces information that better enables citizens to see the value they get for their fees and taxes
In times of fiscal stress, BFO Offers a rational alternative to across-the-board cuts, treating
last year’s budget as the “ideal”, and similar input-driven approaches Provides a structured process for prioritizing activities and programs in light of available $$ Focuses everyone on how best to spend the revenue we have rather than on what we used to do with the revenue we used to have Emphasizes the price of government (a value concept), not just the cost
BFO’s Eight Steps 1. 2. 3. 4. 5. 6. 7. 8.
Identify available revenue – all of it Set high level priorities Allocate all revenues to the priorities Create “Request for Results” Invite/prepare offers Rank Offers Decide what offers to “buy” Present the budget
Getting Started: The First 3 Steps These 3 steps set the stage for the rest of the
process
Determining total revenues Setting the big priorities Allocating revenues to these priorities
Do at the beginning of the process and
require a citizen perspective These are key policy decisions and involve top management and the City Council
BFO Step 1: The Revenue Decision Define how much is available to fund
programs and services What is your revenue outlook? Make the revenue decision up front and communicate it
Get to know your 5 X 5 budget projection (this is an example) (Dollars in Millions)
This Year
Next Year
Year 3
Year 4
Year 5
Beginning Balance
$7
$6
$4
$1
-$1
Revenue
$50
$52
$54
$56
$57
Expenditures
$51
$54
$57
$58
$59
Surplus/ Deficit
-$1
-$2
-$3
-$1
-$2
Ending Balance
$6
$4
$1
-$1
-$3(??)
BFO Step 2: What Results Matter Most? Choosing high level priorities Build on existing work,
Vision or priority statements Strategic plans Many governments already have high level priorities
Elected leaders make the final decisions Citizen input is most valuable up front State priorities from a citizen perspective
Setting priorities is the job of leaders Understand the public’s needs, likes and dislikes
Use citizen input mechanisms Analyze objective data Identify issues and opportunities through an environmental scan Use group processes for creating tentative priorities Discuss the reasons these are priorities Group priorities at higher level of generality until you get to a manageable number Make final decisions on priorities Test these priorities with various stakeholders Consider feedback Extract the meaning of feedback Use judgment Explain logic
Mesa County, CO Citizen Priorities I want Mesa County to manage and preserve public resources.
I want to feel safe anytime, anywhere in Mesa County.
Continue to efficiently and effectively protect and manage all public resources
I want Mesa County to have a Variety of industries that will promote a healthy economy. Promote economic vitality in Mesa County
Continue to promote and protect public safety Mission Statement In partnership with citizens, Mesa County will maintain and enhance quality of life by effectively providing community services that ensure public health, safety, and well being in a transparent and equitable way. I want a community where Slogan citizens of all ages can be Mesa County—Creating a community healthy and successful. of opportunities for all residents Continue to promote and protect public with a focus on the future. health and the success of all citizens.
I want plans and infrastructure that maintain quality of life in the face of rapid growth. Create well-planned and developed communities
BFO Step 3: Allocating Funding to Priorities How much is each priority worth?
Not: How much do they cost?
What is their relative value? It’s a value judgment, not science. Resistance is common Fund accounting is not the same as
budgeting
And it does not drive citizen needs/wants So it shouldn’t drive the budget
Asuza: Pricing Priorities Outcome Goals
Improved economic vitality
9%
A safer community
30%
Better cultural, recreational, and learning opportunities.
10%
A healthier environment
13%
Improved neighborhoods
8%
Improved mobility
10%
Improved efficiency and customer focus
18%
Savannah 2010 Funding by Priority
2008 Proposed Budget Allocation
WELL PLANNED COM M UNITIES 30%
PUBLIC SAFETY 27%
ECONOM IC VITALITY 7% HEALTHY & SUCCESSFUL CITIZENS 21%
WELL MANAGED PUBLIC RESOURCES 15%
What We Have Learned about Pricing the Priorities There will be resistance to doing this upfront
and not all governments do this However, assigning dollars makes the process “real” Allocations can be adjusted later in the process, just as in traditional budgeting
Discussion – The First 3 Steps Any questions for clarification right now?
BFO Step 4: Creating Requests for Results Using Cause and Effect Analysis Teams are selected for priorities. Each team prepares a “Request for Results”
(very similar to an RFP process)
Use cause-and-effect analysis, strategy mapping to identify effective strategies, interventions
Departments also use this approach to develop their programmatic proposals
Consolidated RFRs constitute the budget
instructions/preparation forms
Use cause-and-effect maps to identify key factors affecting results ď Ž to show the link between strategies, activities
(what we spend money on) and the results we need to achieve, so we can do better ď Ž Value for citizens means getting results at a good price, so efficiency matters too ď Ž Evidence (as opposed to implicit assumptions) is applied to move from desired outcomes to spending for programs
City of Savannah / Department Name / Title of Presentation
Primary Factor 1: Leadership
High Performing Government Primary Factor 4:
• Accountability and Integrity
Human Resources Management
• Long Range Strategic Planning • Transparency • Intergovernmental Advocacy
Primary Factor 2:
I want a fiscally responsible, accessible and responsive government that maximizes use of public resources for services I need.
• Competitive Recruitment • Workforce Development • Creativity and Innovation • Succession Planning and Engagement
Fiscal Responsibility • Balanced Budget • Long Range Fiscal Planning
Primary Factor 5:
• Professional Best Practices
Public Resources Management
Primary Factor 3: Citizen Engagement and Customer Service • Communication • Accessibility • Responsiveness • Professionalism
Indicators:
• Asset Planning and Management
• Credit Rating
• Capital Strategy and Investment
• 311 Center / Std Response Time
• Sustainability
• Per Person Cost of Government • Employee Retention Rate • Citizen Satisfaction Survey
• Collaboration
Public Safety Primary Factor: Prevention • Safe Neighborhoods • Well-Designed & Maintained Infrastructure • Public Education • Successful Children • Multi-Agency Engagement
Primary Factor: Responsiveness • • • •
Effective Communication Systems Appropriate & Timely Deployment Interagency Cooperation Capable Response & Recovery
Reduce Risk
I want to be safe and feel safe from crime, fire and other hazards anywhere in the community.
Increase Protection
Indicators: • Response Time to Calls for Service for Emergencies • Results of Citizen Survey
Primary Factor: Preparedness • Effective Plans • Trained, Equipped & Practiced Responders • Effective Emergency Warning Systems • Public Education • Inter and Intra-Agency Cooperation
Primary Factor: Enforcement • Enforcement of Codes & Laws • Offender Accountability • Auxiliary Services
• Part I Crime Rate (by type & by neighborhood) • Casualties and Value of Property Loss from Fire and Other Hazards Other Hazards include natural & man-made disasters, structural hazards, vehicular & pedestrian hazards, and mass public gatherings.
Public Safety Results Team Revised 21 April 2009
Creating performance measures So we can recognize success or failure Only have a small number (2 to 4) Don’t try to cover everything, pick key
indicators for that priority
Response Time to Calls for Service for Emergencies Citizen Perception of Safety Part I Crime Rate (by type & by neighborhood) Casualties and Value of Property Loss from Fire and Other
Hazards
Choosing Strategies Strategies typically flow from factors on cause-and-
effect map, but say what we want to emphasize and ask departments to pursue in the RFR
More of/ less of current strategies New strategies Influence strategies of other actors
What strategies produce the most impact for the
cost? What strategies leverage the factors that contribute most?
Congenital & Genetic factors
Provide access to appropriate and quality physical & mental care
Age and gender
Race/ ethnicity
ID and mitigate risk factors ID and miti
Socio economic status
Emergency care
Specialty care
Chronic/long term care Preventive care
Occupation
Primary care
Healthy Citizens Exposure to hazardous conditions Exposure to communicable diseases
Exposure to hazardous materials
Mitigate environmental hazards
Increase healthy behaviors
Self- protect from accident and injury Reduce substance abuse
Adequate food Safe food
Geographic distribution of providers and facilities
Adequate water Safe water
Quality providers and facilities
Seek appropriate care Healthy sexual behavior
Reduce obesity Healthy diet
Access to coverage
Healthy Exercise
Reduce tobacco use
Sample Purchasing Strategies Focus on the front end - pre-natal care,
immunizations
Focus public health system on addressing
personal choices (obesity, drugs, smoking)
Stop high cost, repetitive cycles of “crisis care” in
emergency rooms
Increase percentage of people with insurance
What We Have Learned: Purchasing Strategies ď Ž Pay special attention to purchasing strategies
--- tend to be the weakest and they are critical. ď Ž Maps lead to purchasing strategies --- where do we want to put our money for the best leverage? ď Ž Some purchasing strategies are used for all priorities (e.g., innovative offers and partnerships)
Strategies Address… What to spend money on “Favor funding prevention over remediation” “Favor funding children over adults” How to spend the money “Give to the customer to make choices” “Give to efforts that show collaboration” Relative priorities “Most money will be spent on ‘x’ but some also on ‘y’ “This is the order in which we will spend money” Specific things we want to buy “We will like an offer that creates more activity downtown.”
Example: Public Safety Strategies Prevention strategies to:
reduce domestic violence reduce recidivism
Community engagement/policing Address ‘revolving door’ offenders Unclog the courts and court diversion Increase voluntary compliance
Neighborhood Vitality Strategy: NV-02 We seek offers that promote and integrate the careful
development and maintenance of public realm and open space throughout the community. Specifically offers that:
Increase the safety, calmness, and accessibility of public streets and facilities, signage and open spaces, integrating pedestrian and cyclist friendly amenities where possible Create, enhance and maintain facilities, parks and squares for the recreation and enjoyment of residents of all ages Ensure public infrastructure is maintained at a “standard condition” level
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BFO Step 5: Inviting and Preparing Offers Internal agencies (and maybe others) create
offers as responses to the Requests for Results Offers explain how proposed program or activities will achieve desired results - a performance commitment at a price Offers assume no guarantee of funding based on historic funding levels Offers are opportunities for change
New, innovative practices encouraged
Offers must explain connections in the priority-strategy-program value chain Offers need to show the link between what
we spend money on (our activities) and priority results Value for citizens means getting results at a good price, so efficiency matters too Offers (programs) must include measures of performance so later performance can be compared to the upfront commitment
The concept of buyers and sellers Buyers:
Sellers:
Taxpayers and
Departments
citizens Elected representatives Results Teams that “wear the citizen hat”
Partnerships (of
departments, of departments and others)
Preparing offers provides opportunity to innovate Give customers money to purchase instead of to
institution Prevention instead of remediation Separate steering from rowing Identify partnerships and collaborations Identify ways to get voluntary compliance Fix inappropriate subsidies Eliminate the cost of mistrust
What We Have Learned: Making Great Offers Leadership should indicate offers they want to
see and assign responsibility for creating these offers Coaching makes a big difference: Ask “what would you really like to do?” Take innovation seriously --- it’s hard
Using Logic Models to prepare budget proposals A logic model sets out a theory of action A logic model is a visual representation of various
relationships Logic models help us make the links between resources, activities, and results, and help us describe them to others Use a logic model to test your chain of logic Use it to explain your chain of logic to others Use a logic model to tell a reasonable (and true) story
Using a logic model to prepare and explain a proposal (also to manage) We need to produce desired results
Results
Therefore, we need to begin by having an impact on intermediate outcomes
Intermediate Outcomes
Therefore, we need to do work and produce a certain level of output
Outputs
Therefore, we need to develop strategies and manage activities that gets the work done
Activities or Strategies
Therefore, we need to provide (and budget) people, materials, equipment
Resources or Inputs
Marathon County, WI Use of Logic Models
Marathon County Winter Recreation Fee-Based Trail Program Inputs
Staff Clients Funding Equipment Supplies Partners
Activities
Outputs
Initial Outcomes
Intermediate Outcomes
Long-Term Outcomes
Provide Rental
Number of
Increase the
Novice Skiers
Novice Skiers
Equipment Facilitate Ski Lessons Host Special Events Host Weekly Senior Citizens Day Groom and Maintain Trails Promotion
Equipment Packages Rented Number of Individuals Taught to Ski Number of People Attending Special Events Number of Miles of Trails Number of Ads Placed
Number of Novice Skiers Participating in Skiing/ Snowshoeing Non-skiers Develop New Skills Public Awareness of the Facility is Increased Older Adults are Attracted to Skiing
Become Regular Skiers Customers’ Physical Recreation Options are Expanded People are Attracted from the Larger Geographic Area Older Adults Increase Physical Activity
Receive Health Benefits from Skiing Customers Participate in Healthy Lifestyle Recreation Local Economy Benefits From Tourism Older Adults Maintain or Improve Health
Practicing cause and effect analysis and strategy development Example: Roads
Priority: A predictable and safe roads system that gets us where we need to go and supports the economy 1. Conduct cause and effect analysis to identify high potential strategies • Collect and analyze evidence to establish cause and effect relationships • Identify strategies that give you the most leverage for the dollar (through evidence or logic)
A Transportation Logic Model (Cause and Effect) What does the evidence say are the biggest barriers to mobility and reliability?
What other factors can you think of?
Where would the City have the most leverage?
A basic logic model* Planning: Start with end in mind
Inputs Strategic Planning
What we invest
Outputs
Outcomes - Impact
Activities Participation
Short Term
What we do
What the short term results are
Who we reach
Assumptions
Medium Term
Long Term
What the medium term results are
What the long term results are
External Factors
Evaluation: Check and verify *Source: University of Wisconsin-Extension, Ellen TaylorPowell, PhD
Strategy: Manage and maintain roads infrastructure to provide maximum possible capacity – safely – to reduce recurring disruptions
Strategic Planning
Tactics: • Innovative traffic management programs • Prioritization and scheduling of maintenance projects for minimum disruption
Start with the end in mind – What do you want to accomplish? Will need measures to evaluate
Outcomes - Impact Short Term Roads employees understand new process for prioritizing maintenance work
Maintenance projects are well prioritized and performed on schedule Traffic management programs are implemented
Medium Term
Long Term
Maintenance backlogs are reduced
People, goods and services move easily and cheaply
Traffic management programs are effective
Recurring interruptions are reduced
Road use is predictable and safe
External Factors: 1.
Development
2.
Weather
What actions will you take (what programs, services will you budget for)? Outputs Activities
Participation
Identify and implement proven or promising traffic management techniques Improve processes for prioritizing and performing maintenance Form partnerships with businesses
Employees, experts, businesses, developers
What resources will you invest and how much do you budget for activities that will achieve results? Inputs Staff Money Materials Partners Research Underlying Assumptions: 1.
Traffic management programs exist that will help
2.
Businesses are willing to participate
3.
County is willing to invest in process improvement
Use logic model in evaluation to check, verify and adjust Organizations set a time period for performance evaluation
Results become feedback for the next cycle of planning
Step 6: Ranking Offers ď Ž Buyers (Results Teams) seek the most for the money
– what is most likely to achieve the desired result?
Neighborhood Vitality Offers Home Purchase Program Park Maintenance Flood Mitigation Urban Forestry Tree Ordinance Admin Sanitation Code Enforcement Property Maintenance Code Enforcement Development Permitting & Inspections Assistant City Manager – PD Clean Sweep/Derelict Rental
Housing Improvement Program Sidewalks/Curb & Gutter ADA Playground equipment
maintenance CDBG Planning/ Implementation ROW Vegetation Maintenance Historic Preservation Neighborhood Documentation Project
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A typical ranking process Results Teams do first ranking of the offers in
each priority area At this point mandates and restrictions on funding sources ignored Feedback given to departments about their offers so they can be improved for the second round of ranking
Second Round of Ranking Based on feedback and first ranking
departments improve offers or may be allowed to propose new offers Mandates, funding sources are factored in at this point All team rankings are recommendations to decision makers!
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Spokane Example: Buying Learn and Grow Offers
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Forced Ranking Process Score
Bob Rochelle
Willie
Stephanie Charles
Joe
Chris
Broccoli
G
V
E
E
E
E
E
Squash
V
G
V
V
V
V
V
Tomatoes
E
G
G
E
V
V
V
Carrots
E
V
E
E
E
E
E
Brussel Sprouts
V
G
G
G
G
G
E
Celery
E
E
V
V
G
G
G
Parsnips
G
V
E
V
E
E
G
Peas
V
E
G
G
G
G
V
Onions
G
E
V
G
V
V
G
Value: E = Excellent; V = Very Good; G = Good
Forced Ranking Process Round 1 Score
Bob
Rochelle Willie Stephanie Charles
Joe
Chris
1 Carrots
20
3
2
3
3
3
3
3
2 Broccoli
18
1
2
3
3
3
3
3
3 Parsnips
15
1
2
3
2
3
3
1
4 Tomatoes
14
3
1
1
3
2
2
2
5 Squash
13
2
1
2
2
2
2
2
6 Peas
12
2
3
2
2
1
1
1
7 Celery
12
3
3
1
1
1
1
2
8 Onions
12
1
3
2
1
2
2
1
9 Brussel Sprouts
10
2
1
1
1
1
1
3
Value: E = 3; V = 2; G = 1 Not Funded
Forced Ranking Process Round 2 Score
Bob
Rochelle
Willie
Stephanie Charles
Joe
Chris
1 Carrots
20
3
2
3
3
3
3
3
2 Broccoli
18
1
2
3
3
3
3
3
3 Parsnips
15
1
2
3
2
3
3
1
4 Tomatoes
14
3
1
1
3
2
2
2
5 Peas
13
2
1
2
2
2
2
2
6 Squash
12
2
3
2
2
1
1
1
7 Celery
12
3
3
1
1
1
1
2
8 Onions
12
1
3
2
1
2
2
1
9 Brussel Sprouts
10
2
1
1
1
1
1
3
E = 3; V = 2; G = 1 Not Funded
BFO Step 7: Decide What to Buy
Results Teams do final ranking of offers based on what contributes most to achieving the priority Decision makers get involved at this point to decide what to buy An entire “shopping cart” of programs must make sense for the community
Typically some rankings change and funding moves among priorities at this stage
The final package becomes the proposed budget.
Final Rankings = Proposed Budget Team recommended rankings given to CEO CEO looks at entire budget across priorities
and may move money and programs We’ve learned that there are always changes but not usually large changes (a 6% shift of dollars among priorities in Redmond, for example)
BFO Step 8: Present, Discuss and Adopt the Budget
Present the Budget as “keeps” not “cuts” Budget is organized around priorities, not departments Council has information on offers and rankings In deliberations, focus is on what works to achieve the priorities Debate what works best (do you agree with the rankings?) Single-issue advocates must say what “above the line” services is less important than what didn’t get funded
Implementing the Budget and Tracking Performance ď Ž Performance agreements negotiated with
department directors ď Ž Method for monitoring developed ď Ž Performance management system needed to track and report performance
Organizing for BFO
Organizing BFO Teams/Roles
City Council Mayor/City Manager Guidance Team (optional) Steering Team Results Teams Process Support Team
(Smaller governments typically have a simpler structure, for example, one team to review and rank all program offers)
A Typical BFO Process Structure The Public
Mayor or Manager
City Council
Steering Team
Process Support Team
Results Team 1
Results Team 2
Results Team 3
Results Team n
City Council Sets price of government Decides citizen priorities Provides comments on Requests for Offers Conducts budget discussions based on what
works to achieve priorities Makes final budget decisions Supports the process
Mayor Champions the process and assigns staff to
carry it out including Results Teams Approves requests for results Proposes a budget to elected body based on the rankings (but may revise) Trusts the process and uses results in proposed budget Regularly updates stakeholders
Guidance Team (Optional) People respected in community and trusted
by elected leaders Advises elected leaders Assures legitimacy and integrity of process Does the process have value
Results Teams Composition varies, but you want a combination of
expertise and strategic thinking Pick your “best and brightest” A few members from outside the organization can be helpful in getting “outside the box” Wear a “citizens hat”
Project Team Composition varies, but includes budget staff Oversees process and communications ---
reviews materials, identifies problems, etc Organizes internal and external communications including rumor control
How Long Does it Take? BFO has been done in 10 weeks and as long
as 9 months By starting early you have more time to get the tasks done and less stress You may need to re-think your traditional budget calendar
Discussion What questions do you have? What features sound promising? What features would have to be modified? What are the next steps?
Assessing BFO Readiness Do you have the time? Do you have the knowledge, skills and abilities, or
can you those? Are your elected officials on board? Do you have support of top management? Do you have the technology? Can your organization deal with change? Do you have a communication strategy? Can your organization deal with the fact that it is an art not a science?
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