Niels Sandalgaard and Christian Nielsen
The purpose of this paper is to investigate the use of budget targets for performance evaluation in small- and medium-sized enterprises (SMEs) from a contingency perspective.
Abstract
Purpose
The purpose of this paper is to investigate the use of budget targets for performance evaluation in small- and medium-sized enterprises (SMEs) from a contingency perspective.
Design/methodology/approach
This paper is based on a survey conducted among small- and medium-sized Danish production companies. It takes a contingency approach and applies structural equation modeling to analyze the data.
Findings
The authors find that budget emphasis is related to size, decentralization and interdependence. Furthermore, the authors hypothesize and find that the degree of budget emphasis is positively related to performance.
Research limitations/implications
The usual limitations associated with survey-based research should be considered before drawing conclusions from the findings. In that regard, replications of the study could be useful.
Practical implications
The practical implication of this paper is that emphasis on the budget target in performance evaluation is of relevance for small- and medium-sized production companies.
Originality/value
This paper contributes by providing insights into management accounting in SMEs. More specifically, this paper contributes to the debate in the SME literature regarding the value of planning and budgeting in SMEs as the paper focuses on the use of budgets for performance evaluation.
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Niels Sandalgaard and Per Nikolaj Bukh
This study focuses on ratcheting and budget behavior in nonprofit museums. Specifically, the authors examine how performance compared with the budget affects future revenue…
Abstract
Purpose
This study focuses on ratcheting and budget behavior in nonprofit museums. Specifically, the authors examine how performance compared with the budget affects future revenue budgets, and how this differs from the extant literature focused on for-profit organizations. The study focuses specifically on the relationship between museums and their sources of public funding and how this affects how museums prepare budgets.
Design/methodology/approach
Based on four years of data covering 97 state-subsidized Danish museums, the authors analyze budget ratcheting using least absolute deviation (LAD) estimations in the form of median regressions.
Findings
The authors find that when actual revenue from admission charges is below the budget, the decrease in the following year's budget is greater than the increase in the following year's budget when actual revenue from admission charges is above the budget (i.e. the authors find asymmetrical ratcheting).
Research limitations/implications
The findings are based on a specific setting (Danish museums), and the results may not be generalizable to other settings.
Practical implications
This study provides insights into the museum sector and other sectors with similar characteristics and contributes to understanding the differences between museums and for-profit organizations when it comes to budgeting. As private-sector management practices are gaining ground in the museum sector, it is important to learn more about budgeting-related issues in this sector.
Originality/value
The asymmetrical ratcheting the authors find is the opposite of ratcheting typically found in for-profit organizations. The authors attribute the results to the incentive conflict between museums and their public funding sources. The authors point to the museums' dependence on public funding as an explanation for the results and, thereby, extend the knowledge on ratcheting to organizations with different characteristics than traditional, for-profit organizations.
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The purpose of the paper is to report the findings of a study of the relation between perceived environmental uncertainty and the abandonment of traditional annual budgets.
Abstract
Purpose
The purpose of the paper is to report the findings of a study of the relation between perceived environmental uncertainty and the abandonment of traditional annual budgets.
Design/methodology/approach
The paper is based on the use of data from a survey among the largest Danish companies. The hypothesized relationships are tested by the use of logistic regression.
Findings
The results show no sign of a relationship between perceived environmental uncertainty and the abandonment of traditional annual budgets. Instead, the results show a positive relationship between competition in the environment and the adoption of rolling forecasts.
Research limitations/implications
Instead of focusing on the budgeting system in isolation, future research should, to a larger extent, focus on management control systems as a package.
Practical implications
The results indicate that a competitive environment could be handled by retaining budgets but supplementing them with rolling forecasts.
Originality/value
This paper is among the first to investigate the relationship between environmental uncertainty and the abandonment of traditional annual budgets.
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Niels Sandalgaard, Per Nikolaj Bukh and Carsten Stig Poulsen
The purpose of this paper is to report the findings of a study of how dispositional factors of motivation rooted in personality interact with participative budgeting to affect…
Abstract
Purpose
The purpose of this paper is to report the findings of a study of how dispositional factors of motivation rooted in personality interact with participative budgeting to affect budget goal commitment.
Design/methodology/approach
The study is based on a survey among bank managers from a Scandinavian regional bank. To assess the motivational disposition of the bank managers, the short version of the multi‐motive grid test (MMG‐S) is used. The management accounting variables are measured by traditional and well‐tested instruments.
Findings
The results indicate that the effect of increased budgetary participation on budget goal commitment is largest for subordinates with a high need for power or a low need for affiliation. For subordinates with a low need for power or a high need for affiliation the effect of budgetary participation is small.
Research limitations/implications
The study confirms that the interaction between personal‐level psychological variables, e.g. motives, and situational variables, e.g. budget participation, determine action, e.g. budget commitment. Taking personal‐level variables into consideration in research on management accounting systems are thus important in studies which include individual level factors.
Practical implications
The practical implications are that a general management concept, as budget participation, should be applied with knowledge of how situational factors will interact with the personal characteristics of the involved employees.
Originality/value
Most management accounting research that uses psychological theory, focuses on the effects of management accounting on the minds and behaviour of individuals and not on the effect of individual's minds on management accounting as this paper does. The paper is the first to use the MMG‐S in a management accounting study.
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Niels Sandalgaard and Per Nikolaj Bukh
This paper aims to investigate reasons for going Beyond Budgeting and the practical issues organizations face when they change their management accounting system based on…
Abstract
Purpose
This paper aims to investigate reasons for going Beyond Budgeting and the practical issues organizations face when they change their management accounting system based on inspiration from the Beyond Budgeting model.
Design/methodology/approach
The authors apply a case study approach. The primary data source is interviews. The case company is a global company in the agri-food industry that is organized as a cooperative.
Findings
The authors propose that many organizations that change their management accounting system on the basis of inspiration from Beyond Budgeting will maintain fixed budget targets. Furthermore, the authors propose that even when the use of budgets at the corporate level focuses on few line items, the diagnostic use of budgeting at lower levels in the organization may focus on a larger number of line items.
Research limitations/implications
The study is subject to the usual limitations of case-based research. The propositions made in the paper should be further investigated in other organizations attempting to change their management accounting system with inspiration from Beyond Budgeting.
Practical implications
This study shows that the lack of internal benchmarks and the need to deliver the expected results to the company’s owners might hinder the implementation of the Beyond Budgeting model as described in the practitioner-based Beyond Budgeting literature.
Originality/value
The paper is one of the few case studies in the academic literature to analyze the practical issues organizations face when changing their way of budgeting on the basis of inspiration from Beyond Budgeting.