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How does human behaviour affect budgetary control?

      

How does human behaviour affect budgetary control?

  

Answers


Faith
Human problems in budgeting were identified in 1953 by Chris Argyris who identified following four prospects:


(a) Pressure device:
The budget is seen as a pressure devices used by management to fence lazy employees to work harder. The intention of such pressure is to improve performance that the unfavourable reactions of subordinates against it seems to be at the core of the budget problem.

(b) Budgetman want to see failure (Accountants). The accountants would succeed by reporting deviation from the real. The accounting dept is usually responsible for recording actual achievement and comparing this against the budget. Accountants are therefore budget men. Their success is to find significant adverse variances and identify managers responsible. The success of the budgetman therefore is the failure of another manager and this failure causes loss of interest and declining performance. He also pointed out that the accountant on the other hand was fearful on having the budget criticised by the management may deliberately make it more difficult to understand.
(c) Targets and goal congruence
The budget usually sets targets for each department. Achieving the departmental targets becomes of paramount importance regardless of the effect this may have on other departments and overall company’s performance. This is the problem of goal congruence - “results in inter-departmental targets rather than organizational goals’-

(d) Management Style
Budgets are used by managers to express their character and patterns of leadership on subordinates. Subordinates resentful of their leadership styles may blame the budget rather than the leader (budget man). Would these perspectives hold in current organizational management?


Titany answered the question on October 12, 2021 at 08:22


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