It
began with a class project. It ended up changing the budgeting
process for an international relief agency and being honored as a
finalist for the prestigious INFORMS Wagner Prize. Smith student
Rick Nidel, MBA ’05, Ioannis Gamvros, a Smith PhD candidate, and
S. Raghavan, associate professor of management science, used
optimization methods to help decision-makers at Catholic Relief
Services, an international relief and development agency, allocate
the agency’s budget in a way that was aligned with its strategies
and goals.
 Raghavan was teaching the MBA elective “Decision Modeling with
Spreadsheets,” showing students how to model different types of
business problems. Nidel, who had worked for Catholic Relief
Services for ten years before becoming an MBA student, immediately
saw the potential of the technology to help the agency with its
budgeting process. He approached Gamvros and Raghavan, who were
interested in the challenge presented by this real-world business
problem.
Each year, the agency allocates about $75 million in unrestricted
funds—donations which have not been designated for a specific
purpose—to relief and development efforts in 99 countries. Catholic
Relief Services wanted its budget to reflect its priorities: the
alleviation of poverty, the reduction of HIV/AIDS, the empowerment
of women and the preservation and promotion of civil liberties and
human rights. The decision process needed to be equitable,
transparent and easily understandable to the agency’s stakeholders,
including donors and managers of relief programs around the world
that receive support from Catholic Relief Services.
Under Raghavan’s guidance, Nidel and Gamvros designed a model and
a spreadsheet tool for the agency, defining a metric that helped the
agency maximize the investment impact of unrestricted funds.
 The
model had to take into account a plethora of complex factors, such
as the agency’s philanthropic goals, the size of a country’s
population relative to its need, the availability of public funding,
and the efficiency of the relief program.
The project was a perfect application of theory to practice.
Gamvros, Nidel and Raghavan were recognized by the Institute for
Operations Research and the Management Sciences (INFORMS) as
finalists for the prestigious Daniel H. Wagner Prize for Excellence
in Operations Research, putting them in the elite company of large
organizations like Merrill Lynch, General Electric Global Research
Center, and AT&T Labs.
Catholic Relief Services was also very pleased with the results
of the team’s work. Sean Callahan, vice president of overseas
operations, says the model has allowed the agency’s decision-makers
to approach budgeting decisions with increased consistency and
professionalism. “Once we decide the percentage of investment in a
country, we can then place that out over five years, enabling us to
do a forecast model for our budgets over a five-year period,”
Callahan says, describing how Catholic Relief Services uses the
model. “People know what funding they are going to have this year
and in subsequent years.” |
