Magazine article Security Management

Master the Budget, Line by Line

Magazine article Security Management

Master the Budget, Line by Line

Article excerpt

DURING THE PAST THREE YEARS the business picture for the aerospace industry has changed, and I have seen my security department's annual budget shrink from $21 million to $15 million and the staff from 420 to 270. Yet we have maintained a proprietary force, continued 40 hours of annual in-service training, and sent employees to specialized training programs on topics such as hazardous chemicals and disaster recovery. We have also assumed the responsibility for fire protection and disaster preparedness for the entire 14,000-person company.

Security managers have been isolated in the world of law enforcement and asset protection, but those who wish to maintain thriving departments must train themselves in business finance and speak the language of the accounting and business managers who control the overall company budget. It is equally important that each security department have a well-trained accountant or bookkeeper to track the spending within the department.

The need for security is recognized and appreciated by most company employees; however, the rising costs of security make it a convenient and frequent target for budget cuts. The ability of security professionals to manage and contain department costs effectively is critical to the success and survival of the security department.

Security managers should be prepared to answer specific questions on the security budget, line by line, and have adequate justification for increased or continuing costs. Security professionals must learn to work with the business base and find creative ways to reduce costs and maintain service. Here is how I do it for my $15 million budget. My staff begins preparing its budgets in August. These are then collated into one budget package. Each supervisor must ask himself or herself the following:

* Do I have the optimum staff to do the job?

* Does my staff have the proper equipment to do its job professionally?

* What training does my staff need this year?

As these questions are answered, the justification for the budget costs will be built.

In a group setting, these first-draft budgets are discussed line by line. Each item is questioned and justified, and alternative solutions are explored. The department manager must take advice and suggestions from the line managers and ask hard questions, ensuring no fat is in the budget. Only when the department manager is satisfied will the budget be defensible.

In most departments labor will be the single largest expense. The fact is that employing personnel is costly. Options do exist to reduce this cost, such as employing a contract force rather than a proprietary force. I believe, however, that for most companies the proprietary officer is the better value in spite of the increased cost. Regardless of which type of security personnel is used, the cost of personnel is significant. If proprietary officers are used, their salary alone is not their true cost.

The supporting company staff and benefits must be calculated in the overall cost projection. Overhead staff is an inclusive term; it is the accounting clerk, the company nurse, the janitorial staff, and everyone supporting an employee regardless of his or her work area. This may be called "related payroll expenses " or the " burdened " labor rate. This is the rate that must be used when calculating the security budget.

Generally, each company has a fixed percentage that when added to the actual salary reflects the employees' true cost to the company. In small, lean companies this may be as little as a 20 percent addition; in larger companies it may be as high as 50 percent.

With these additional costs, the proprietary force comes under close scrutiny and requires rigorous defense. I believe it is important to maintain a proprietary force and push for it each year, justifying the cost by explaining the lower turnover rate, increased company loyalty, and certifiable training in the topics the company feels are important. …

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