2.2 Management styles (Hopwood) Hopwood described three management styles that can be applied to budgets and performance management:
§ Budget constrained.
§ Profit conscious.
§ Non-accounting.
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Research was carried out by Hopwood (1973) into the manufacturing division of a US steelworks, involving a sample of more than 200 managers with cost centre responsibility. Hopwood identified three distinct styles of using budgetary information to evaluate management performance.
§ Budget-constrained style – Here, the main emphasis in performance evaluation is the manager’s success in meeting budget targets in the short-term, with no consideration for other aspects of performance that are not targeted in the budget.
§ Profit-conscious style – The performance of a manager is measured in terms of his ability to increase the overall effectiveness of his area of responsibility, in relation to meeting the longer-term objectives of the organisation. At a cost centre level of responsibility, performance might be judged in terms of reducing costs over the longer-term, rather than meeting short-term cost targets. Short-term budgetary information needs to be used with care and in a flexible way to achieve this purpose.
§ Non-accounting style – With this style, performance evaluation is not based on budgetary information, and accounting information plays a relatively unimportant role. Other, non-accounting performance indicators, such as quality, are as important as the budget targets.
Hopwood’s research suggested that each style of performance evaluation had the following behavioural effects.
§ With the budget-constrained style, much attention was given to costs and there was a high degree of job-related pressure and tension. This often led to the manipulation of data in accounting reports.
§ With the profit-conscious style, there was still a high involvement with costs but less job-related pressure. Consequently, there was less manipulation of accounting data. Relationships between managers and their colleagues and superiors were also better than with a budget-constrained style.
§ With the non-accounting style, the results were very similar to the profit-conscious style, except for a much lower concern with cost information.
§ Hopwood found some evidence that better managerial performance was achieved where a profit-conscious or non-accounting style was in use. Poor performance was often associated with a budget-constrained style.
Subsequent studies by Otley (1978) involving profit centre managers in the UK coal mining industry contradicted Hopwood’s earlier findings. One particular area of difference was that the UK study showed a closer link between the budget-constrained style and good performance. The manager evaluated on a rather tight budget-constrained basis tended to meet the budget more closely than if it was evaluated in a less rigid way.
Test your understanding 3
A manager is awarded a bonus for achieving monthly budgetary targets. State three possible behavioural implications of this policy. What should be done to try to improve the process? |
发表于 2012-2-23 17:09:42
