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Journal article outline

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Journal article outline

“Budgeting Gamesmanship,” Christopher K. Bart, The Academy of Management Executive, Nov 1988; 2, 4; ABI/INFORM Global pg. 285

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·         Budgets are required by management to drive an organization towards its goals.

·         An important budgeting principle is that the numbers should be challenging but realistic; honest and accurate.

·         Uncertainty in the business environment and budgeting gamesmanship are the major factors that hamper budgeting.

·         This article investigates budget gamesmanship at the product level in several large diversified companies in a case study.

        I.      Firms with games

·         These include: Alpha, Beta, Delta, Kappa, Omega, and Phi.

a.      Games that product managers play:

–         Type of game: understating volume estimates, undeclared or understated price increases and cost reduction programs, overstated expenses and undeclared line extensions.

b.      Game size

–         Very significant in terms of the absolute dollar and percentage of sales.

–         The games have a material impact on overall company profitability.

c.        Facilitating factors in budgeting gamesmanship

–         When the promotional budget is big, there is a greater opportunity.

–         Product history: since a firm does not have an experience in new products, there is a wide range in which the volumes can be estimated.

–         Products with a long history had budget games grater in some products than others.

–         Products with a harvest strategic posture: had less environmental uncertainty and smaller promotional budgets; their cushionability was observed to reduce.

–         Time constraint that was put on senior managers during the product plan review.

–         Less knowledge and experience in a group manager was a limitation towards finding where cushions were.

d.      Factors that constrain budget games

–         The historical promotional spending pattern of the products.

–         The senior managers’ tendency of giving the product managers a profit target contributes to discovery and elimination of the product managers’ budget.

e.       Why product managers play games with their budgets

–         Objective setting process: since the organizations are profit oriented, there is an inclination towards manipulating budgets so as to attain a high target.

–         Market uncertainty: changes in the market that affect a product’s volume prompt product managers to change budgets in order to meet the original profit comments.

–         To achieve their product profit targets; two factors favored this drive:

                                                                     i.            Formal company system: indicated the measure of performance evaluation for product manager salary adjustments and bonus payments.

                                                                    ii.            Informal company practices: helped product managers to understand what the actual performance evaluation measure was within an organization.

–         At Beta, product profit performance compared to the original plan was the basis of bonus payment to the product managers.

–         In Alpha and Delta, profit responsibility was emphasized by the product manager’s job description or the salary performance evaluation criteria.

–         In Kappa, Omega, and Phi, project managers were motivated to achieve their profit targets.

f.       Senior management attitudes

–         Two dominant attitudes:

                                                                     i.            In Alpha, Delta, and Omega, the senior managers are reluctant over the changes made in the budgets provided the product managers meet the profit targets.

                                                                    ii.            In Beta, kappa, and Phi, the senior management is the custodian of the company’s cushions since this puts pressure on product managers which produces higher creativity and energy.

      II.      Firms without Games

·         The product managers did not use cushion numbers in their budgets due to a number of reasons:

a.       Senior managers did not follow the product managers on budgeting activities and they were not held responsible for their products’ profit performance.

b.       Performance evaluation in these firms focused on personal development, training of assistants and overall management of products.

c.        Profit conscious as opposed to being profit responsible.

d.       There is trust between senior management and product mangers maintained by senior management effort.

   III.      Summary and conclusion

·         Formal and explicit performance evaluation criteria are likely to cause an end to higher levels of budgeting gamesmanship than less formal and more implicit reward criteria.

·         In budget gamesmanship, the firm’s reward system appears to have an impact on the product managers’ behavior than what the senior managers say.

·         The senior managers’ attitude and the product managers’ reward system appear to have a relation in the range of games that the product managers play and the general performance of the firm.

·         Game playing in budget making by product managers is not the essentially an attribute of dysfunctional behavior, however, it may be a way of survival in an intimidating environment.

Reference:

Bart, K.C. (1988): Budgeting Gamesmanship, The Academy of Management Executive. Retrieved on 22nd February, 2009 from: http://benchiang19.com/budgeting.pdf

 

Cite this Journal article outline

Journal article outline. (2016, Aug 20). Retrieved from https://graduateway.com/journal-article-outline/

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