Developing a new budgeting system for personnel costs: case Pharma

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School of Business | Master's thesis
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Objective of the study This qualitative commissioned case study aims to develop a new budgeting system for headcount and personnel costs in a Finnish subsidiary of a multinational pharmaceutical organization. Furthermore, this study examines the role uncertainty might play in the budgeting process. The objective of the study is to define how a new budgeting system should be designed for the case company’s needs. As there is little conclusive evidence about the form which budgets should take in organizations, a detailed case study might help to partly fill this research gap. Data and methodology The study method to be used is a qualitative constructive case study. The empirical data consists of nine interviews with relevant stakeholders and benchmarks within the pharmaceutical organization, as well as internal and external company documents and several informal discussions with some of the stakeholders. The interviewed persons were Human Resources Director, Finance Director, and Head of Controlling within the Finnish subsidiary, and two Business Controllers from other European subsidiaries of the company. Main findings The study found that through driver-based planning, variance analysis, and attaching action plans to scenarios showed early positive results for control, learning, and discussing strategy. Answering the requirements from the headquarters was made more transparent through driver-based planning. This transparency facilitated variance analysis that was expected to enhance organizational learning. attaching personnel costs to products provided aids for decision making, increasing critical discussion about headcount decisions. Attaching personnel costs to products provided aids for decision making, increasing critical discussion about headcount decisions. Combining initiatives to scenario analyses facilitated debate and communication about reactions to possible scenarios. The results indicated that budget can serve various uses within an organization, depending on the perceived (un)certainty. The different uses also allowed different levels of uncertainty to be formalized in the budget: when used for control, budget uncertainty was informal knowledge, while when used for discussion, the flexibility of the budget was formalized. Thus, budget uses should not be examined as an either-or-question, but as co-existing within organizations.
Thesis advisor
Malmi, Teemu

budgeting, uses of budgeting, uncertainty, pharmaceutical industry
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