Role of Budgeting in Achieving Managerial Performance in Organizations (Term Paper Sample)
term paper of not less than 15 pagessource..
Contents TOC \o "1-3" \h \z \u Introduction PAGEREF _Toc44800804 \h 1Background PAGEREF _Toc44800805 \h 1Budgeting process PAGEREF _Toc44800806 \h 2The role and objectives of management in organizations PAGEREF _Toc44800807 \h 4The Influence of Budgeting on Managerial Performance PAGEREF _Toc44800808 \h 4Budget and its Role in Planning PAGEREF _Toc44800809 \h 4Budget and its Role in Controlling PAGEREF _Toc44800810 \h 5Budget and its Role in Resource Allocation PAGEREF _Toc44800811 \h 6The role of budgeting in motivation PAGEREF _Toc44800812 \h 6The role of budgeting in evaluation PAGEREF _Toc44800813 \h 7Budgeting and its Role in Decision making PAGEREF _Toc44800814 \h 7Budgeting and its role strategic management PAGEREF _Toc44800815 \h 8Budgeting and financial management PAGEREF _Toc44800816 \h 8Potentially conflicting in budgeting PAGEREF _Toc44800817 \h 9Conclusion PAGEREF _Toc44800818 \h 10Reference PAGEREF _Toc44800819 \h 11
Role of budgeting in achieving managerial performance in organizations.
Management is a sequence of activities which comprises planning, organizing, leading, and controlling, which is aimed towards a company’s human resources, financial resources, and information resources, in order to achieve the company’s goal effectively and efficiently (Manafe & Setyorini, 2019). Onyiah, Ezeamama, Ugwu & Mgbodile, (2016) define performance as a manager’s capability to perform a series of managerial activities. While budgeting system is characterized by a comprehensive nature; it covers and coordinates the main aspects of the organization (production, marketing and finance). The budgeting management system is a regulation of interaction between company management and structural divisions, which specifies the responsibilities of each department and job descriptions of employees during each phase of budgeting in internal orders and regulatory acts. This study seeks to review the existing literature on the relationship between budgeting and managerial performance
Budgeting has a positive and significant effect on managerial performance (LE & Nguyen, 2020; Kawatu & Kewo, 2019; Manafe & Setyorini, 2019). While budgeting may be directly linked with motivation and attitudes, its relationships with performance appear to be much more complex. Many authors have attempted to find simple, bivariate rela- tionships between uses of budgeting and performance, with very poor results. Manafe & Setyorini, (2019) found that budgeting is employed in organizations for several purposes of which the main superior ones are planning and control. For planning purposes, budgets can function as a tool to forecast profitability, allocate resources or communicate specialized knowledge about one a part of a corporation to other parts (Hayat, 2016).
The varieties and differences in explaining the effect of the budget on managerial performance are extensive. Nevertheless, budgeting can never fully eliminate information asymmetry and agency costs as it also has some drawbacks (Alexandra & Edheku, 2020). By leaving the most a part of constructing the budget to subordinates, superiors run into the danger of receiving dishonest or biased forecasts thanks to the limited information they need themselves. When budgeting is employed for allocating scarce resources, for instance, subordinates have an incentive to “overstate” their productivity to accumulate a greater share of fixed resources. Another main force that counteracts managers’ incentive to report accurate and unbiased information is that the use of budgets for decision control (Tarigan, 2016).
Despite potential synergy effects among subordinates, a standard theory assumes that, if full and costless commitment to information included within the budgeting process is out there to superiors, budgets will yield the best results in terms of budget attainment frequencies and profits However, in practice, full commitment does not come without substantive costs, the time a superior
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