3 Conflicting objectives Throughout this chapter there have been examples of conflicting objectives that occur in budgeting. The implications of the conflicts and the method of resolution will often be specific to the organisation and will depend on:
§ the specific purpose for which the budget is to be used
§ the management style and culture of the organisation
§ the knowledge and experience of the managers preparing budgets.
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Test your understanding 1
An organisation may produce a range of forecasts under different scenarios to explore possible courses of action. Forecasts can normally be updated as and when new/better information comes to light. The budget is the agreed plan towards which all of the organisation is working and which is used to measure actual performance. A budget is usually fixed for a period (perhaps a quarter) – this helps maintain a stable benchmark, and makes it easier to bridge back to the point in time when the budget was produced.
Test your understanding 2
The key point here is that the answer depends on who awarded the pay increase.
If this was the production manager’s decision, they the cost would be controllable. Depending on the culture of the firm, the manager would then be under pressure to explain why they departed form the budget in this instance.
If awarded by, say, the board of directors, then the cost increase was not controllable by the manager and should not feature in their appraisal.
Test your understanding 3
The manager may try to:
§ delay discretionary short-term expenditure, e.g. maintenance, at the expense of long-term performance to improve results.
§ manipulate results to make sure the relevant targets are achieved.
§ incorporate budgetary slack into the targets to make them easier to achieve.
The process can be improved by measuring performance against a variety of targets, including non-financial targets, and linking performance to long-term objectives.
Test your understanding 4
A budget has many purposes including:
§ planning
§ control
§ performance evaluation |
发表于 2012-2-23 17:09:42
