Budgeting at a crossroads - The viability of traditional udgeting - A case study

dc.contributorAalto Universityen
dc.contributorAalto-yliopistofi
dc.contributor.authorHänninen, Vili
dc.contributor.departmentDepartment of Accountingen
dc.contributor.departmentLaskentatoimen laitosfi
dc.contributor.schoolKauppakorkeakoulufi
dc.contributor.schoolSchool of Businessen
dc.date.accessioned2013-04-03T01:30:19Z
dc.date.available2013-04-03T01:30:19Z
dc.date.dateaccepted2013-02-08
dc.date.issued2013
dc.description.abstractThe objective of this research was to examine the viability of traditional budgeting. In the recent decades, criticism towards traditional budgeting has been notably increased, calling it a relic of the past which hinders companies' effective operations management and even prevents reactions to changes in the market. The most vocal critics favor abandoning traditional budgeting completely. However, at the same time, budgeting is almost universally used. Therefore, the objective was to find out whether traditional budgeting would still be useful and do the critics have a point. The criticism has given rise to a number of alternatives to traditional budgeting and this research analyzed three major alternatives and their plausibility. As the effectiveness of budgeting systems depend on its appropriateness to the particular company and on the company's environment, business and people, this research was carried out as a case study. The chosen company was a multinational professional services company, which requested to remain anonymous. The focus was limited to Finland's organization. The research data was gathered by interviewing the case company's managers. In total 11 people were interviewed, consisting of the CEO, CFO, Business development leader and each of the Service Line leader, with supplement interviews from one additional manager in each Service Line excluding one. The gathered interview data was supported by the researcher's observations and knowledge on the processes based on 4, 5 years of work experience in the case company. The research revealed that the company favors challenging budgets, although global administration emphasizes the planning aspect of budgets; realistic estimates of the outcome. The target-orientation enables a stronger strategic link, especially in the form of growth targets as well as the use of budgets for motivational purposes and target-setting. The company has managed to reduce the need for budget gaming, as even though personal level targets are derived from the budget, achieving them only affects the annual performance rating. While the rating decides the multiplier for the bonus, the actual size of the bonus pool is based on team performance. The company's budgeting system contains a few issues. First of all their expense control is somewhat ineffective due to ambiguity in the responsibility and authority over the costs. The bigger problem lies in the revenue protectionism, which could be partly solved by reducing the amount of budgeting units. The results indicated that traditional budgeting can still be considered to be the best possible system for its purpose. The alternative methods analyzed proved to be problematic to replace the case company's current budgeting system and their plausibility remained theoretical in the company's business context. The case company should, however, put emphasis on developing their current budgeting system and practices within the globally set frames in order to correct at least the biggest concerns in protectionism and expense control.en
dc.ethesisid13148
dc.format.extent84
dc.format.mimetypeapplication/pdfen
dc.identifier.urihttps://aaltodoc.aalto.fi/handle/123456789/8962
dc.identifier.urnURN:NBN:fi:aalto-201304041869
dc.language.isoenen
dc.locationP1 I
dc.programme.majorAccountingen
dc.programme.majorLaskentatoimifi
dc.subject.heleconlaskentatoimi
dc.subject.heleconaccounting
dc.subject.helecontaloushallinto
dc.subject.heleconfinancial management
dc.subject.heleconrahoitus
dc.subject.heleconfinancing
dc.subject.heleconbudjetointi
dc.subject.heleconbudgeting
dc.subject.heleconohjausjärjestelmät
dc.subject.heleconcontrol systems
dc.subject.keywordbudgeting
dc.subject.keywordbudjetointi
dc.subject.keywordFinancial control
dc.subject.keywordTaloudellinen kontrolli
dc.subject.keywordPerformance Management
dc.subject.keywordSuorituksen ohjaus
dc.titleBudgeting at a crossroads - The viability of traditional udgeting - A case studyen
dc.typeG2 Pro gradu, diplomityöfi
dc.type.dcmitypetexten
dc.type.ontasotMaster's thesisen
dc.type.ontasotPro gradu tutkielmafi
local.aalto.idthes13148
local.aalto.openaccessyes
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