The strategic planning is the long-term plan of organisations and budget is the short-term plan that contains more detail regarding to business operations. The budget is like a blueprint for entire business which is prepared for the next year. So it is designed by estimating and forecasting future trends in market. Budget is used to evaluate actual performance of a company or a section of company with desirable performance that this desirable performance is based on forecasting markets. Therefore, an excellent budget process should have this ability to convert objectives and desirable goals (it means future estimated outcomes) into data.
This statement could be wrong in some situations. Various scholars provide opposites arguments regarding to this statement. Beneath the main body these two arguments against and in favour of this above statement are discussed abundantly.
One of the main success elements of budget is finding the right resource to implement the budget calls for extensive use of human resources. But sometimes even with the appropriate and well-designed budget it is not possible to reach budget’s targets because of human resource or their misunderstanding of budget. Organisations try to have correct congruence perceptions within their employees but some researches demonstrate different outcomes (perception) may be exhibited when the individuals have not parallel objectives compare to organisational goals. These two main issues of budgeting success factors are mentioned in this writing; besides, one of the main differences between imposed budgeting and participatory budgeting is mentioned in this study. This difference is regarding to the way of communication.
Table of Contents
1. Introduction
1.1. What is the Budgeting?
1.2. Origin of budgeting and the origin of criticising its process
2. Main body
2.1. Evaluation critically the statement ‘an excellent budget process is the ability to convert objectives and goals into data’
2.1.1. Supportive reasons
2.1.2. Contradictory reasons
2.2. Evaluate critically the statement ‘finding the resources to implement the budget calls for extensive use of human resources and involves correct perceptions of individual roles and communication play an important role’
2.2.1. Advocating
2.2.2. Criticising
2.3. Describing the differences between the communication flows when the budgeting process is imposed or participatory
3. Conclusion
Research Objective and Scope
This work explores the necessity and efficacy of the budgeting process in modern organizations. It examines the critical debate surrounding whether budgeting effectively converts organizational objectives into actionable data, analyzes the behavioral implications of human resource involvement, and distinguishes between the communication dynamics of imposed versus participatory budgeting systems.
- The theoretical evaluation of budgeting as a tool for goal conversion and data translation.
- An analysis of the behavioral impact of budgeting on employee performance and organizational culture.
- A critical review of the risks, including ethical issues and goal incongruence, associated with rigid budgeting.
- A comparative study of communication flows in imposed versus participatory budgeting models.
Excerpts from the Book
2.2. Evaluate critically the statement ‘finding the resources to implement the budget calls for extensive use of human resources and involves correct perceptions of individual roles and communication play an important role’
The success of budgeting depends on the people who perform the budget and they will be affected by it (Ross, 2008), Budgets are potential to influence on employees’ behaviour. Finding appropriate resource and evaluating their involvement are so important for organisations. These topics mostly discussed under budgetary control and they are known as behavioural aspects of budget. Scholars have variety of ideas in this field of study. Some advocate the budgeting can use of human resource extensively, motivate employees significantly and increase performance.
On the other hand there is vast domain of scholars. They argue that budgeting process cannot increase performance and cannot provide one congruous perception within the whole organisations besides they claim that budget motivate employees but in the wrong way. It motivates human resource to do unethical jobs to achieve budgets goals. On the rest of this chapter these to contradictory concepts are mentioned.
In recent years, more attention has been focused on these behavioural implications of accounting methods and procedures. This mostly attention has focused on the individual and organisational consequences that may result from the use of budgets.
Summary of Chapters
1. Introduction: Provides a definition of budgeting as a short-term planning tool and outlines the historical context of its development and subsequent criticism.
2. Main body: Critically evaluates the core functions of budgeting, including goal-to-data conversion, the behavioral effects of human resource management in budget implementation, and the communication structures of different budgeting methods.
3. Conclusion: Synthesizes the contradictory arguments regarding budgeting efficacy and emphasizes that the value of the process is heavily dependent on organizational size, culture, and industry-specific needs.
Keywords
Budgeting process, Strategic planning, Operational planning, Goal congruence, Human resource management, Budgetary control, Participatory budgeting, Imposed budgeting, Behavioral implications, Organizational performance, Communication flow, Financial measures, Goal setting theory, Corporate ethics, Market forecasting.
Frequently Asked Questions
What is the primary focus of this work?
The paper examines the necessity and effectiveness of budgeting processes within organizations, questioning whether traditional budgeting remains relevant in volatile business environments.
What are the central themes discussed?
The central themes include the conversion of organizational goals into numerical data, the impact of budgeting on human behavior, and the differences between participatory and top-down communication flows.
What is the core research objective?
The primary objective is to critically assess the budgeting process by evaluating its role in resource allocation, goal alignment, and its potential for both organizational success and negative behavioral consequences.
Which methodologies are employed in this study?
The study utilizes a literature-based critical review, analyzing existing scholarly arguments and case studies (such as Enron and Sears) to contrast the benefits and pitfalls of current budgeting practices.
What topics are covered in the main body?
The main body focuses on the validity of budgeting as a tool to translate objectives into data, the behavioral implications for employees, and a comparison of imposed versus participatory budgeting methods.
How are the keywords defined for this research?
The keywords highlight the intersection of management accounting, behavioral science, and organizational communication, reflecting the study's interdisciplinary approach.
Why is the Enron case study mentioned in the text?
Enron is cited as a significant example of how rigid and ill-perceived budgeting targets can drive employees toward unethical behavior, ultimately causing catastrophic organizational failure.
What distinguishes participatory from imposed budgeting?
Participatory budgeting involves subordinates in the decision-making process (two-way communication), whereas imposed budgeting follows a top-down approach where targets are set by management with little input from lower levels (one-way communication).
Does the author conclude that budgeting is unnecessary?
The author does not dismiss budgeting entirely but concludes that its success is highly dependent on how it is implemented and whether the organization fosters goal congruence rather than just rigid procedural compliance.
- Quote paper
- MBA Payam Haerifar (Author), 2012, Budgeting process, is it really necessary?, Munich, GRIN Verlag, https://www.grin.com/document/187174
