Journal of Higher Education Policy and Management

Vol. 33, No. 5, October 2011, 497508

Implementing responsibility centre budgeting

Joseph Vonasek
Askew School of Public Administration & Policy, Florida State University, Florida, USA
Recently, institutes of higher education (universities) have shown a renewed interest
in organisational structures and operating methodologies that generate productivity
and innovation; responsibility centre budgeting (RCB) is one such process. This paper
describes the underlying principles constituting RCB, its origin and structural elements,
and RCBs historical use by US universities. Its central focus is the organisational features that must be accounted for when making the decision to implement RCB. Included
are the construction of responsibility centres from differing academic units, the allocation of revenues by function to centres, the allocation of unit operating costs according
to the level of use, and a methodological base for allocating administrative and facility costs among the various centres. Focal considerations for implementation include
an administration fully committed to the process, and an adequately sized, technically skilled, and motivated group of managers. Effective implementation demands that
administrators understand the process and that managers expect to be accountable for
performance.
Keywords: activity-based budgeting; cost centre budgeting; decentralised budgeting;
responsibility centre budgeting; responsibility centre management; value centre
management; value responsibility budgeting

The current economic downturn and plunge in the value of endowment funds has brought
even the highly endowed Ivy League higher education institutions a renewed interest in
alternative organisational structures and operating methodologies for productivity improvement and innovation. This article addresses responsibility centre budgeting (RCB) as one
such process and, with respect to other literature on this topic, provides substantial detail
describing its underlying managerial principles, structural elements, and links to documents detailing the indirect cost allocation process critical to its implementation. Also
addressed in this article are the origin and historical use of RCB by universities.
Briefly described, RCB is an organisational structure that logically groups a universitys
academic units according to similarity of purpose and funding source into responsibility centres, each under a single manager, typically an academic dean, with decentralised
decision making authority. These centres are categorised according to their revenue generating capability as cost centres or profit centres. The managers of these centres are
charged with achieving both operating and fiscal performance goals and are motivated
by the prospect of retaining excess savings/earnings for their centres use, as well as
compensation or sanctions commensurate to performance.

*Email: jav05c@fsu.edu
ISSN 1360-080X print/ISSN 1469-9508 online 2011 Association for Tertiary Education Management and the
L H Martin Institute for Higher Education Leadership and Management
DOI: 10.1080/1360080X.2011.605224
http://www.tandfonline.com

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J. Vonasek

Although this article starts by describing RCB and its history of use in US universities,
predominantly it discusses three features that must be taken into account organisationally
when making the decision to implement RCB. These features are broadly described as
follows:
1. Administrative commitment to the process, including an understanding of what
the process will require and the administrative principles needed to accomplish the
conversion in an open, equitable, and participative process that treats all units of
the institution without favour.
2. The organisational and programmatic framework, including the construction of
responsibility centres from the differing academic units, the logical allocation of
revenues to centres by function, a methodological base for the rational allocation of
indirect operating costs to centres according to their level of use, and an accounting
and performance information system that facilitates the RCB process.
3. Human resource requirements, including an adequately sized group of technically skilled and entrepreneurially motivated managers to operate the responsibility
centres who have the expectation of being held accountable for meeting their established performance standards, as well as an adequate reward structure for having
met them.
What is responsibility centre budgeting?
The common accounting methodology used by US universities for funding individual
academic units is that employed by most US local governments and is known as fund
accounting. In that accounting environment, an academic unit is typically required to track
only its direct expenditures. Unless it is established as a business enterprise, it will not
likely have to recognise either the revenues or overhead costs accruing to its operations.
Accordingly, depreciation or use charges for equipment and facilities, and even charges for
their operation and maintenance are not billed to a units budget. The structure of this budget system hardly gives programme managers an understanding of their actual operating
costs, much less an incentive to economise in spending or maximise revenues.
RCB is an alternative organisational structure that has been developed to address the
need for the managerial evolution of universities. This budgeting system has also been
referred to as responsibility centre management, value centre management, decentralised
budgeting, activity-based budgeting, value responsibility budgeting, and cost centre budgeting (Priest, Becker, Hossler, & St. John, 2002). Some unique underlying features of
RCB are its provision of both academic authority and fiscal responsibility to a universitys
component units to instil a more entrepreneurial management culture (Linn, 2007). Thus,
RCB decentralises the management of a university (Whalen, 1991).
RCBs framework
Under RCB a university is generally restructured into functional responsibility centres
that are responsible for the conduct of its core missions. Centres may be designated according to their purpose as a profit centre or a cost centre (Maddox, 1999, p. 235). Profit
centres are units known to produce positive net revenue consistently. Conversely, although
a cost centre may generate revenue, it cannot regularly produce revenue in excess of its
expenditures.
Where it benefits the university and its general plan under RCB, cost centres that provide services utilised by other responsibility centres should charge them for those services

Journal of Higher Education Policy and Management

499

to defray or eliminate a cost centres operating loss (similar to internal service funds in governments). This practice is common where those services can be charged to a profit centre,
or against grants, endowments, or gifts. Institutional administrators can also use RCB as
an effective incentive tool. A universitys component units can be allowed to carry (at least
some significant portion of) savings or profits forward as discretionary funds for future
programmes or acquisitions. By giving its component units managers this incentive, RCB
provides budgetary goal congruence and limits principal-agent motivations for end-of-year
spending flurries (Linn, 2007).
Under RCB, each responsibility centre has one manager with overall accountability
for achieving the units financial targets. Kostens treatise on the perspectives of academic deans in an RCB system recognises them as middle managers whom presidents
and provosts will likely assign this responsibility (2006). The deans role in a decentralised
decision-making structure is most like chief executives in firms; they are pressured by the
demands of both the central administration and the faculty.
RCBs underlying principles
In managerial terms, RCB applies a number of principles that can make an organisation more flexible and adaptive. These include (Strauss, Curry, & Whelan, 1996; Whalen,
1991):

Enhanced decision-making authority by managers; moving decisions closer to

the locus of their impact makes them accountable and decisions more pragmatic.

Development of an organisation-wide decision information system; when both

administration and managers cooperatively define the information to be produced

and have access to the same reports, communication between them is improved.
Organisational rules that enumerate the responsibilities of managers and their
structural incentives; providing clear decision rules and understandings of rewards
and sanctions reduces decision response times.
A performance evaluation process that is an established part of the institutional
structure emphasises the accountability of managers.
A sense of group commitment; each responsibility centre is aware that the success of the institution is dependent upon their individual and collective success and
understands the authority, responsibility, and resources assigned to them reflect that.
The recognition that institutional goals can only be achieved if the administration retains overall control of programme priorities and the organisations central
plan provides managers motivation to refrain from principal-agent behaviour.

The history of RCB at US universities

While unit performance evaluation through cost centre accounting has been in use in the
private sector for quite some time (its basic principles rest in Adam Smiths pin factory and Fredrick Taylors Scientific Management), RCB began for universities in the
latter half of the twenteith century. The earliest use of the concept appears with Harvard
Universitys application of the Every Tub on Its Own Bottom concept in the 1960s. Under
this organisational form, an academic unit was awarded funding based upon its generation
of revenue, with each unit also being responsible for its own expenditures (Whalen, 1991).
The concept was advanced at the University of Southern California during the early
1980s, with their implementation of Revenue Centre Management, and at the University
of Pennsylvania where revenues were allocated to academic units based on their enrolment,

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J. Vonasek

with indirect costs (overhead costs) also being allocated to those units. RCB migrated
to Indiana University near the end of the 1980s when the University of Pennsylvanias
Provost became President of Indiana University. At Indiana University, RCB was applied
to a clean slate; an integrated system, where an academic units structure of incentives,
rewards, and accountability were in concert with a statement of the Universitys overall
organisational principles and objectives (Whalen, 1991). Some other universities where
RCB has been implemented include the University of Toronto (late 1990s) (Lang, 2002),
and the University of Michigan (in 1997) (Courant & Knepp, 2002).
The use of RCB and the identification of responsibility centres are not limited to academic and administrative units. The concept has been applied to intercollegiate athletics
and has proven successful. There, the concept provides a clarified atmosphere in which,
after all direct and indirect costs are identified, coaches are able to understand the full
costs of their programmes to the institution and may entrepreneurially manage their sport
(Strupeck, Milani, & Murphy, 1993).
Essential structural and organisational features for implementing RCB
With the foregoing perspective of what RCB is, how it came into existence, and its utility within universities, we must recognise that its use does require certain conceptual
and structural organisational features to be successful and effective. Among these are the
administrative commitments that need to be present, decisions that will need to be made to
define the form that RCB will take, and the structural components that must be a part of
the organisational framework.
Committed academic leadership
Implementation of RCB requires, first and foremost, an extension of the organisational
core of human resources to include the existence of strong academic leadership. University
administrators must have the commitment, character, and fortitude necessary to guide and
direct the conversion. Similarly, administrative staff throughout the institution will need to
be skilled and capable of accomplishing the conversion. Because RCB is an informationdriven process, the conversion process will need to be open and equitable for all units of
the institution.
An administrative commitment to an open and participative process must be present.
All units must be involved in the development and implementation of RCB. The implementation and use of RCB will be more easily accomplished when there is buy-in by all
affected units (Whalen, 1991). Hidden administrative agendas and preferential treatment
of any unit that is not in accordance with the stated principles and objectives of the institution will become known and affect the perceptions and morale of those units not treated
equivalently.
The organisational issues encountered in the conversion of a university to a RCB
organisation are functionally similar to those found in Organisational Development and/or
organisational culture change. More guidance on these issues can be found in the academic
research and case study literature of those management practices.
The importance of human resources to RCB
It may be perceived that historical methods of operation have been utilised to the extent
that many academic managers lack the fundamental skills and perceptions necessary to

Journal of Higher Education Policy and Management

501

conceive and implement innovative programmes. This has resulted, over time, in human
resource development systems that de-emphasised their entrepreneurial role, replacing it
with principal-agent incentives (North, 1990). This makes it understandable why universities seeking to improve efficiency and organisational performance in times of economic
stress have found little success.
As it is generally impractical to start over with an entirely new key staff, deficiency in
human resources may be the hardest organisational hurdle to overcome. This article revisits
the importance of this component in more detail, later.
Structuring the framework
The Hanover Research Council (HRC, 2008) iterates three basic organisational and
programmatic structural models, each differentiated according to their devolution of
decision-making authority: The Department-Based Model, the College-Based Model, and
Hybrid Models.
The Department-Based Model represents a shared financial decision-making power
between a dean and their department chairs, with the dean retaining authority over both
general and specific school and university goals. Once university and college-level
revenues have been projected and their priority goal expenditures funded, net revenues
are allocated to departments as block grants (HRC, 2008, pp. 34). In the CollegeBased Model, vice-presidents and deans retain more of the financial decision-making
authority and determine funding allocations to departments. That is, financial decisionmaking is more centralised (HRC, 2008). Hybrid models engage features intended to
recognise organisation-specific cultural characteristics that a university wishes to favour
(HRC, 2008).
Constructing responsibility centres
Development of the organisational and programmatic framework is among the most fundamental tasks in the implementation of RCB. The structural core in RCBs adoption as
a standard method of operation is the defining of responsibility centres. In accomplishing
this, Whalen (1991, p. 19) recognises three general types of functions in universities that
can be identified as responsibility centres:
1. Academic centres: accomplish a universitys core mission; teaching, research, and
public service,
2. Support service centres: provide services used by the academic centres, and
3. Executive management centres: coordinate and guide the other centres via
planning, policies, and procedures.
Once its function types were differentiated, seven measures were established at Indiana
University to define responsibility centres within each of the three functions (Whalen,
1991, pp. 1923):
1. Organisational structure: the existing structure of schools and colleges will
define most responsibility centres.
2. Clear definition of management responsibility: someone must be responsible;
however, sometimes organisational structures promote groupings that are actually
illogical, a common funding source is usually indicative of a logical grouping.

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J. Vonasek
3. Number of centres reflects size and complexity: where multiple campuses exist,
the number of centres is not always proportional to size; it will vary dependent
upon experience.
4. Approximate parity of size and complexity: ensures that the organisational
distance between a decision and its implementation remains about the same.
5. Intra-centre discretion to decentralise: if it is impossible to achieve parity of size
and complexity, internal decentralisation of a responsibility centre along the lines
of the RCB format can retain flexibility.
6. Policy issues: despite what might be viewed as a generally inappropriate grouping,
institutional priorities may dictate a functional grouping.
7. Inclusion of all fund groups: centre managers are expected to be able to coordinate the activities of programmes under all fund types and not violate any of the
conventions of fund accounting.

Accounting systems
Understandably, because the entire organisational framework of the university may be
functionally rearranged in the implementation of RCB, the restructuring will need to be
reflected and supported by a redefined accounting system. This redefinition is an important
component of RCB implementation; it comprises what has been termed Responsibility
Accounting and represents the interface of management accounting with an organisations
strategies and structures.
This means accounting structures and management strategies must be congruent.
Without this feature, intra-organisational debate concerning the accurate measurement of
goal achievement by the accounting system will become problematic (Rowe, Birnberg, &
Shields, 2008). Where a uniform chart of accounts exists, the consistency of this process
will be enhanced. This is true for both revenue and expenditure accounting of the various
units.
Attribution of revenues
Focused decisions concerning how revenue will be assigned to responsibility centres need
to be made. The sources of income for a university can be attributed to differing activities and should be allocated by rational means. The largest source of revenue for a public
university is usually state appropriations, with the next largest being student tuition and
fees. Indirect cost recovery on sponsored grants, interest earnings, and sales of services
constitute the remainder of a public universitys major revenue sources. The bases for
the allocation of each of these sources will be different due to the differing levels of
contribution to each by different responsibility centres (Whalen, 1991).
Because the underlying strategy of RCB makes the attribution of costs and revenues
a critical factor in responsibility centres success, as well as the acceptance of the process by unit managers, it is critical that a programmatic framework be developed that
equitably attributes revenues to responsibility centres. The advisory group assembled by
Indiana University made this a priority (Savage, 1988) and the typology constructed by the
Hanover Research Council (2008) views it a core issue. The attribution of tuition revenue
was largely accomplished at Indiana University by the development of formulaic standards
that garnered deans support. The attribution formulae reduced the effects of political influence in the budgeting process, making it more open and the distribution of tuition revenues
fair (Cekic, 2008).

Journal of Higher Education Policy and Management

503

Attribution of state appropriations

While it is rational and relatively simple to allocate tuition and fee revenues where they
are earned, revenue attributable to grant recoveries and services where they are earned,
and interest income to the centre managing investments, it is the allocation of government
appropriations that is most difficult. Because of their general nature, these funds are not
easily attributable to any specific centre. Further, because they are a predominate source
of funding they will be the revenue used to offset losses in academic cost centres. The
annual competition for state appropriations will certainly be the fiercest contest in the RCB
process.
To retain control of the allocation process, Whalen (1991) suggested a combination of
allocation bases be applied to these funds: an amount allocated in support of both central
administrations academic objectives and innovations, with a second allocation based on
achievement of specific performance measures. There is also general agreement that an
administrations reservation of funds to apply to unit-level innovations is appropriate and
beneficial (Paulsen & St. John, 2002). Funding the costs of innovations that will lower a
units costs or increase its revenues is also essential to the universitys central plan and
should be encouraged by the administration.
The use of multiple allocations serves to counter organisational perceptions of undue
consideration of any specific centres programmes while reward for performance acts as an
incentive for goal congruence between central administration and the centres. In respect
to fairness for all centres, the revenue allocation methodology that is implemented will
require periodic review to assure that its underlying assumptions are accurate and that each
centre receives a revenue allocation that representatively reflects its earnings and needs.
One positive aspect of RCB often overlooked is that its allocation of tuition and
fee revenue to academic units on the basis of where it is earned is that this concept of
revenue following the students who pay it tends to act as an indirect incentive to instruction (Paulsen & St. John, 2002). An influence to guard against here is moral hazard
attributable to inappropriate motivations; such as dumbing-down and grade inflation
to attract more students (Strauss & Curry, 2002). A related negative aspect is that the relative independence of the component units can generate both resistance to interdisciplinary
programmes and programme redundancy (where generally equivalent subjects are taught
in more than one academic area) (Linn, 2007).
Attribution of programme costs
Similarly, since some programmatic restructuring may occur during the conversion process,
it is essential that the costs attributed to programmes be allocated appropriately to their
respective cost centres. The process utilised at Indiana University was structured around the
principle of minimummaximum acceptability. At the minimum, costs which a programme
had control over were allocated to it, using the most certain measurement of the services
being provided. At the maximum, a negotiated formula that included all components of the
services provided was used (Cekic, 2008).
Indirect costs
During the RCB implementation process, the prospect of allocating the full cost of indirect
services to the centres must be taken into consideration. The traditional fund accounting environment does not typically budget the costs of administrative services for any
activity not considered a business enterprise. These indirect costs, which represent not
only administrative costs but unbilled services such as facility maintenance costs, utilities,

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grounds-keeping, and equipment and facility use, are generally perceived as overhead.
Contrary to private sector practices, where operating units are typically assessed their share
of such costs, they can be perceived as free services (Steiss & Nwagwu, 2001).
Although some accounting research in the private sector posits that the inclusion of
indirect cost has little impact on performance, there is also research indicating improved
performance. Blanchard and Chow (1983) suggest that the inclusion of indirect cost in
the establishment of performance objectives is actually a function of deciding where the
target will be set. Their perception is that, not only does its inclusion reduce budgetary
slack it motivates more effective use of those resources with the effect being greater goal
congruence with the organisations objectives. As with revenue allocations, the direct and
indirect cost allocation methodologies that are implemented will require periodic review
to assure that their underlying assumptions are accurate and that each centre is receiving
indirect cost allocations reflecting its actual use of those functions.
Indirect cost allocation
The typical process by which indirect costs are allocated to centres is through the development of an indirect cost allocation plan that rationally distributes them to operating units
based on their reasonably determined use. There are several perspectives that can be taken
in the application of this principle. First is Blanchard and Chows (1983) argument; it gives
centre managers the understanding that administrative services are not free and gives
them reason to economise on their use whenever possible. Secondly, as another positive
aspect, the university is able to look objectively at programmes and assess their actual cost
of provision in comparison with their contribution to the overall academic objectives.
A negative aspect of the process is that managers of cost centres may perceive themselves as being ever more burdened with expenses that they cannot recover through their
centres activities. In order to improve the acceptance of the allocation process by centre managers, it is recommended that the methodology used be as simple and logical as
possible (Whalen, 1991).
The cost allocation plan
Allocating indirect costs needs to be uniform and rational. Further, it should be based
on the requirements of local taxation and other agencies. In the US, this is Circular A21 of the (federal) Office of Management and Budget (OMB), which provides applicable
principles for defining the costs of facility and administrative functions and the allocation
of those costs to federal grants as overhead (OMB, 2004). This circular establishes a
set of principles . . . designed to provide that the Federal Government bear its fair share
of total costs, determined in accordance with generally accepted accounting principles,
except where restricted or prohibited by law for its contracts, grants, and other agreements
with educational institutions (OMB, 2004, Sec. 1). Use of this methodology legitimises the
allocation process, allows centres that administer federal grants to maximise the indirect
costs they recapture through grants, and minimises the cost of preparing a supplementary
allocation plan.
A critical recognition in the allocation of revenue and expense is that, just as the overall
objective of the universitys funds is fiscal balance, it is the responsibility centres objective as well (Whalen, 1991). Therefore, a university must either budget all indirect cost
to responsibility centre budgets or set net income targets for profit centres and maximum
deficit targets for cost centres that will also capture the universitys indirect costs.

Journal of Higher Education Policy and Management

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Organisational change, entrepreneurialism, and responsibility centre managers

Implementing RCB entails not only changes to a universitys structural alignment and
accounting practices, revisions to other supporting practices will be necessary. The emphasis of RCB on human resources comes from the central component in its implementation
being an adequate supply of capable responsibility centre managers. If, in their initial evaluation of the application of RCB to their university, the administration questions whether
their management staff has the skills and abilities to adequately function under the RCB
process, not only should they consider postponing RCBs implementation, they should
question their selection and promotion process for managers (Maddox, 1999).
Because RCB represents decentralisation and flexibility for centre managers, and
because administration will need to have control of the overall organisation, responsibility
centres will need to begin generating much of their own management information. This
shift in task responsibility for periodic measurement and tracking of performance needs to
be coordinated with the administrations financial and accounting centres so that the data
collected and reported by the centres are accurate and meaningful to both the centre and
administration.
Exercise of this newfound flexibility will also require that responsibility centre managers have an in-depth understanding of the financial policies and practices of the
university, along with the technical skill and interest in managing these aspects of their
centre. Policies will need to be well developed prior to implementing RCB and the
understanding of their meaning must be clear and shared by both administration and
responsibility centre managers. Failures within this area can be critical to the organisation
as a whole (Maddox, 1999).
Accountability and responsibility centre managers
It can be expected that with the freedom to manage the functions of their responsibility
centre, managers will also be held accountable for their performance compared to budget
objectives. Thus, another aspect of the RCB implementation process will be the development of performance evaluation standards for managers that reflects their success in
meeting financial targets as well as the other measurable responsibility centre outcomes.
The establishment of performance measures should be a mutual task involving both
administration and management where a relevant weighting of the different types of targets in the evaluation process is defined. All goals, targets, and objectives must be mutually
understood and their standards of measurement clear. As with other productivity measures, those developed for financial targets should also take into account the existence of
uncontrollable exigent circumstances. Performance evaluations should take into consideration only whether a manager took steps to appropriately control the conditions that were
presented to them.
There are some cautionary aspects of RCB implementation that should be noted. The
perception of the fairness of the implementation process by unit managers is important.
Implementation will likely be contentious and may be smoothed somewhat through use of
a participative process. The RCB implementation process is highly sensitive and should
serve to assure the centres they are being assigned their share of revenue and costs on
a reasonable and equitable basis. This process also serves to develop confidence among
profit centre managers that they are not being unduly burdened with costs disproportionate
to their use of services and facilities.
Morale issues may affect cost centre managers who feel that they do not have the
same degree of entrepreneurial opportunity as their profit centre managing peers. This

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second-class citizen syndrome can sometimes be addressed through the award of retained
savings that result from their cost control efforts. Conversely, the profit centre managers
onus is that where cost centre managers are not expected to generate earnings, profit centre managers who either fail to generate profits or generate less than expected profits can
face sanctions. This accountability can range upward from reassignment to termination,
programme elimination, and/or outsourcing.
Failure to adequately manage the financial targets of a responsibility centre, after circumstances have been taken into account, must be taken as an indicator of unfitness for
that responsibility. Once RCB is implemented, a determination of that nature concerning
a responsibility centre manager must result in their termination or, minimally, reassignment. To not do so is a symbol that cues managers of other responsibility centres that the
administration is not committed to the concept of RCB.
This risk for managers is a primary element of RCB. Without accountability, the motivation for achieving retained earnings/savings has no risk and RCB loses its credibility.
Similarly, for a responsibility centres manager to be adequately motivated, the same sort of
relationship between financial performance, annual evaluation, and compensation needs to
be established. Those managers who have high achievement levels and regularly attain their
financial and other performance targets should be compensated in a manner that reflects
their accomplishments (Maddox, 1999, pp. 238240).
Conclusions
In that it represents a reorientation of a universitys managerial culture from a fund accounting, expenditure-based mindset to one emphasising innovation and competitiveness, RCB
is a tool that academic administrators may wish to consider as a response to the current
economic state of affairs. The key to whether or not RCB will be the effective response
they seek, however, will be dependent upon the ability of their university to adapt its
organisational culture to RCB.
University administrators should carefully assess themselves and their organisation for
possession of the traits and resources necessary for a successful and effective conversion
to RCB. They must have sufficient administrative horsepower to realign their universitys
organisational structure into responsibility centres, convert its accounting and information
systems to reflect the new structure and operating principles, and rewrite its policies to
establish an integrated organisational structure with incentives, rewards, and accountability
that will be completely congruent to their universitys overall goals and objectives.
Administrators need to carefully survey the ranks of their line managers and determine
whether they have adequate numbers of appropriately skilled individuals with an interest in
managing responsibility centres in this new environment where the organisations focus is
on efficiency, effectiveness, and accountability. They must also determine each individual
academic units degree of willingness to commit to this process. All units within the university must participate in the conversion and buy-in to the concept and its resulting changes.
Finding sufficient conditions and resources to accomplish the technical aspects of a
conversion to RCB, a universitys administration must again affirm whether they themselves have the commitment, character, and leadership skills that will be required to engage
in an open and equitable process of change. The commitment of administration will have to
be complete and total in order for the conversion to be successful. A universitys administration will not find the process feasible if it contemplates inequitable treatment of any unit.
This will be particularly true should there be any hidden agenda that provides favouritism
or special treatment of any specific academic programmes or functions.

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In summary, although the implementation process is not easy, its technical complexity
is not excessive. Where an implementing university will experience its greatest challenge
will be in effecting the change in its organisational behaviour; achieving buy-in to the
process by its managers; and in maintaining the commitment of its administration to the
conversion process. Where these conditions can be sufficiently achieved, the benefits of
RCB are promising. The ability of managers to innovate and achieve revenue maximisation, cost reduction, and productivity improvement can be reasonably expected. These
results will evolve from the combination of the enhanced authority, motivations, rewards,
and sanctions present within RCB.

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