Despite being ubiquitous, the traditional budgetary control process and its end product (budgets) have been widely criticised in extant management control literature. Prior to the 1990’s concerns about budgeting were raised by academics and the concerns were mostly about ways of improving budgetary systems- Better budgeting (Argyris 1952). Now the criticisms are led by management consultants with an interest to persuade companies to change their management models by moving beyond the budgets (Hope & Fraser 1999, Wallender 1999). The criticisms of budgetary control system, which include: wasting of managements’ time, encouraging dysfunctional behaviour and incapable of meeting the demands of competitive environments among others, are well documented in the literature (Libby & Lindsay 2010). However, the existing literature does not access the criticisms through different theoretical perspectives. Marginson (1999) identifies: management control, cybernetics, organisational behaviour and contingency as four perspectives through which management control can be understood. This essay analyses budgeting and budgets through these different perspectives to enable a clearer evaluation of the arguments.
One of the perspectives for assessing budgeting and budgets is management control perspective. This perspective deals with how managerial objectives are aligned with that of an organisation. Budgets channel managements’ effort towards the achievement of organisational objectives through the use of Accounting Permanence Measures (APMs). The APMs represents what is required from managers. Consequently, rewards are triggered when they are a...
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...Most of these criticisms are constructed under the assumption that budgetary control system is strictly still based the principles of controllability and functionality. Budgetary control system has evolved from being at the centre of management control system to being part of a wider control system. Organisations now do not reward and penalise people only based on their ability to meet budgetary targets but also consider other external events. Most organisations now encourage team working with members being selected for several departments. Regardless of the perspective used, it can be seen that the traditional budgetary control process is problematic, however the current system when budgetary control systems are used in a wider management control system caters for most of the criticisms. The call for budgets to be totally abandoned is therefore far-fetched.
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