Topic 1: Budgetary control system and its link with performance management

You need to find someone who will act as your mentor as you are required to give a Presentation of your RAP findings to them.

In part 2 of the report you will need to outline some budgetary techniques and then apply some of them to your organization (to satisfy the Understanding & Application assessment criteria 1 & 2) In part 3 you will need to evaluate the appropriateness of the techniques your organisation uses rather than just state them as such, otherwise you will not have any original analysis of your own.

I would suggest that you try to adapt the principles of a SWOT analysis to this part too, that is, assess the budgetary technique(s) actually used by your organisation in terms of their strengths, weaknesses etc. I am not sure about how you come up with a threat though – all I know is that I saw a project failed on this topic and it was for Application and the feedback said they hadn’t used a model and told the student to use a SWOT!!! (So ever since I’ve given this advice). Threats are supposed to be from the external environment so try to find something even if it is a bit tenuous… and of course use the SWOT heading so if the same marker actually marks it, you have ticked their box….. ( they are not going to fail you if your ‘Threat’ is nebulous if everything else meets the performance criteria ) 😀

Generally it is better to outline one or two models / techniques and apply them really well than to go for too many and not do them very well. Personally I’ve found very few students do the Balanced scorecard well at all unless they actually work for the organisation so I tend to discourage its use overall. KPIs would be ok but choose the techniques you can apply the best.

Yes you need to get the mentor to sign or agree or whatever as occasionally OBU do check! 🙂

@originalbanisi

Your research will need to establish whether there are clear links with the performance management and how well the budgetary control system feeds into the decision making process (are variance reports acted on; are managers held accountable for discretionary/controllable costs etc. are budget forecasts reviewed and revised appropriately? is there evidence of improvements that can be traced to the system? Is feedback used appropriately?) Possibly a management questionnaire may help here.

Here are a few Project Objectives and research questions and how to approach them that you may like to consider. Obviously these are generalised and depend on the actual organisation chosen and what information will be available

1. To identify the budgetary control systems used by the organisation
2. To look at the role of budgetary control system in performance management and decision making in the organisation
3. To assess the effectiveness of the budgetary control systems as a performance management tool in the organisation.
4. To give appropriate recommendations to management.

RESEARCH QUESTIONS
1. Which forms of budgeting methods and control systems does the organisation use?
– Outline these preferably with a diagram including feedback loops to illustrate the control systems.
-Show the level of management involved and their contribution/participation

2. Does the organisation use measures of performance management e.g. KPIs, Variance analysis ?
– Investigate these, discuss their relevance to both the manager they relate to and assess whether the manager is being judged by these and the importance of the KPIs to the organisation as a whole

3. Are there clear links between the measurements of performance and the manager’s ability to control the cost (e.g. non-discretionary costs/ discretionary costs) ?
– discuss these and any issues arising from this supplying examples and evidence about whether budgets in the organisation are motivating/ applied fairly/ have improved the performance of managers and their departments.

4. Do the benefits for having a budgetary control system outweigh the costs both in financial terms and in improving efficiency of the organisation to meet its objectives?
– e.g. do the financial results provide evidence of improved performance? has staff turnover decreased? Is staff morale good/bad; (with these it may be appropriate to see if there is a relationship between particular departmental managers’ tenure in the role and their ability to retain staff)

It may be appropriate to do a management questionnaire but you must conduct this properly (see p.36 of the information pack on primary data collection). Markers are very critical of most questionnaires because often it is obvious that students have either faked the data or imply that the data “proves” something when it doesn’t, because the data is based on subjective perceptions. Only facts can be used to state something is true (and when data is fabricated it rarely stacks up and is credible). Both these common mistakes will lead to fails in Application and also Evaluation

In a nutshell to do a successful T1 you need to establish the actual functioning of the budgeting process in this organisation and investigate how it affects decision making and whether it operates as a means of controlling costs and achieving the organisation’s business objectives. Document the actual process and establish definite outcomes and measure these in quantitative terms. Rather than trying to rely on individuals’ subjective perception of what they think happens via a questionnaire frame your questions to extract facts from the appropriate people. It may be appropriate to have some open-ended questions to get particular information of managers’ experiences and expectations but be careful how you interpret these when discussing effectiveness of the budgetary process – cite their comments as appropriate but steer clear of making sweeping statements unless there is sufficient evidence, particularly independent evidence from elsewhere that supports the comments you make

Forgive me, but please think very carefully about doing this topic. It is probably the hardest of all to pass.

I had 2 students who did this in P39 and inspite of producing good reports and using variance analysis they were both failed simply because they had not compared their respective successful companies performance against a (hypothetical).set of principles of good budgeting,. As one student commented – why would a successful company really do this? Would Tim Cook (Apple’s CEO) or the CEO of Coca Cola sit their budgeting teams down and tell them that they have been doing their budgeting wrong all these years because they weren’t applying some theoretical principles of good budgeting – of course they wouldn’t!! It is time markers got real !!

I had a 3rd student wh didnt manage to submit in P39 so in the light of the other students experiences I suggested that she ensured that she out in some principles of good budgeting and make some comparisons with these for good measure. Which she did and got a Grade B in P40

The moral of this story is if you do submit on this topic bung in some principles of good budgeting. However I would suggest probably choosing a different topic (I no longer mentor for it because of its low pass rate)

I am a bit confused by your reference to the SLS as this is a distinct from the Research & Analysis Report. I produce a work book to help students with the SLS so if you could contact me via my website address if you are having issues with this.

Reference to my your last question – yes you must compare the performance against some theoretical budgeting principles – or risk being failed.

[It is a nonsense as some eminent researchers (Hansen, Otley and van der Stede) are saying that budgetary control and performance management have different objectives and therefore their goals are not necessarily congruent – but this point seems to be lost in the tick-box approach adopted by the Topic 1 markers]!