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Paper Topic:

Behaviour problem with budgeting and beyound budgeting model

Behavioral Problems with Budgeting and Beyond Budgeting Model

2007 Page : 1

All organizational Managers have to do certain management functions such as planning , control , coordination , staffing , motivation , leading communication and organizing . These functions differ from organization to organization due to different organizational cultures , nature of activities and its complexity , size , staff pro in terms of values and skills , internal political activity its intensity and is level external environment in which they exist in terms of social , political legal and environmental issues they face and its nature in terms of stable

or dynamic and the Management philosophy of the senior and executive level of management

The traditional Budgeting is a tool for planning and control activities such that it enable the organization direction as well to coordinate activities and compare actual performance with Budgets so that to identify variance and investigate the causes and determine whether they are controllable or uncontrollable and revise plans if the organization cannot achieve the panned performance because of uncontrollable factors

The traditional budgetary process has many advantages . The advantages are that it forces managers to formulate detailed plans for achieving the targets for each department and operation , promotes coordination and communication , clearly defines the areas of responsibility for the achievement of the budgets , enables remedial action to be taken as variance emerge , motivates employees by participating in the budgetary process of setting or formulating the budgets , improves allocation of scarce resources . Economizes management time by using the principle of management by exception . However they have serious drawbacks , They are mostly of a behavioral type . Page : 2

The drawbacks of the traditional Budgets are that budgets may be perceived by the lower level managers and employees as it is imposed by the senior management and thus affects labor relations as well it may also tend to have inaccurate record keeping , In addition budgets may increase conflict over the resource allocation or they may blame others if they don 't meet the targets as well in practice it is difficult to reconcile individual goals with corporate goals and the plans cannot be accurate in a dynamic environment and detailed planning consume considerable time and resources of managers and they may

Perceive it as a futile activity . The budgeting also may induce mangers to spend all what they get even though they can spend less because of the attitude we better spend it or we will lose it . In the traditional Budget as a plan and control tool managers can also over estimate expenditure because of the fear they will be blamed if expenditures are not within the budgets and sales budgets will be under estimated for the reason that the sales people may fear if they don 't meet the sales target and for the fear of losing performance pay if such a rewarding system exists

In a global economy in the current 20th an 21st century the changes in technological economic social and political climate have become more rapid and dynamic as well unpredictable than...

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