Financial management of libraries: past trends and future prospects - Financial Management

ABSTRACT

THE GROWING ALIGNMENT OF INFORMATION SERVICE MANAGEMENT to business-based models of management since the 1970s is evident. The impact of the information and communication technologies (ICTs) on all areas of information service management is bringing about further structural changes and adjustments to practice. The financial environment within library and information services is reviewed and a structure for financial management is presented based on funding source and level of commercial activity. A set of criteria for library resource and service management based on Maurice Line's proposals is reviewed and these are critically appraised against the parameters of the business and financial models discussed. A good fit between Line's principles and business and financial parameters is found. A discussion of macroeconomic factors and contemporary trends is offered. A set of objectives for financial management of library and information services is developed and reviewed in the light of future trends and stakeholder perspectives.

INTRODUCTION

During the last twenty years there was a growing trend to align library and information service management to business models of management. In the late 1970s business conditions were rapidly evolving in response to changes in economic thinking. Monetarism and its political children Reaganomics (in the U.S.) and Thatcherism (in the UK) reinvigorated the debates about taxation, investment, and public spending. Market forces, the role of markets, and competition were given new prominence and interpretations. The roles of the consumer and customer in society and in commerce were highlighted. Efficiency, the elimination of waste, and quality delivery were new watchwords. The role of central government, economic intervention, and balances between public and private sector activities were analyzed, criticized, and redefined. In short, the deregulation of economic activity was to be the favored means of ensuring growth and wealth creation. This cycle of change would inevitably come to affect every sector of economic activity including library and information services.

The recent historical record, and indeed contemporary events, show that the library and the information sector has had to face a changing and ever more turbulent environment since the late 1970s. Rising library materials price indices were amongst the first indicators (e.g., well summarized in Cummings, 1992). Mid-1970s inflation--a symptom of rising oil prices--affected all economies tied together by global trade and against this background the new 'economics of the right' found its moment arriving to challenge the post-1945 Keynesian consensus.

Today's economic and business climate is still influenced by these changes observed first during the 1970s in the U.S. and UK. The substantial dependency of the professional library and information area on public sector funding was to prove a considerable disadvantage. The virtual entirety of public libraries in the U.S. and UK were then, and still are, dependent on local or central public finance. These major sources of revenue were constrained as a result of these political and economic changes because the reduction of public spending was one of the major goals advocated. Likewise, academic and research libraries in the UK were and are virtually all publicly funded; in the U.S. private funding plays a greater role for research libraries, even though public funding is very significant for many.

In a perverse way, with hindsight, and from a library and information standpoint it could be said that the economic environment over the last twenty years has been both a negative force and a stimulus at the same time. Constraint on public funds and a shift to an enterprise culture undermined the welfare tradition of social provision. But it also encouraged a climate of innovation and so gained new potential and momentum. Little by little these library and information services have begun to explore markets and commerce, new customer sectors, added-value services, and new managerial responsibilities. They have discovered, albeit through a painful process, that public obligations can be sustained and innovation and adaptation engendered at the same time.

Against this background lies the justification for this paper. Given that financial management can be considered as a body of principles and practice with a close relation to applied economics, a review and discussion of financial management is an appropriate theme for this special issue on the economics of libraries: theories, measurements, costs, and related issues. Our period of study unfolds against a background not only of new economics but also of new technologies.

We can also observe that the post-1980s applied economics of the library sector is now giving way to a new economics which has to reflect the incorporation of the information and communication technologies (ICTs). Fresh organizational responses requiring business models hitherto unfamiliar are now indicated. What was public not-for-profit enterprise is not yet really (and perhaps never will be) private enterprise, but it has nevertheless undergone some radical rethinking and real changes in practice.