The efficacy of budgets as a management control system

Traditionally, control systems are evaluated on the basis of the efficiency of their use and their effectiveness in accomplishing goals and objectives. The need to continuously improve efficiency has become a way of life for many organizations. During economic hardship such need is further amplified and emphasized. However, efficiency measures have little to do with the success of a given control system or the organization in general. Increasing efficiency may buy additional time, but only at the expense of risking the future; a penny wise and a pound foolish. Similarly, effectiveness measures provide management with too little information and too late to correct what is wrong or to help them avoid undesired results in the future. The current research was motivated by the criticism against organizational researchers as being "<i>primarily students of performance or efficiency, and only incidentally students of organizations</i>" (Thompson, 1967 :6). Much of organizational research remains confined to considering the efficiency of organizational actions or the effectiveness of its outcome, and may account for the little progress in understanding organizational behaviors. This study represents a new approach to researching organizations by focusing attention on the input side of budgetary systems. The findings from this study point to the need to include efficacy measure in the evaluation of the performance of control systems such as budgets. By considering efficacy measures, management can assume a proactive role in assessing the performance of a budgetary system at a point in time when potential problems can be resolved; during inception. The results from this study should not be construed as being against the consideration of effectiveness or efficiency measures. If anything, the current study emphasizes the need of having a systemic and holistic view of evaluating the performance of budgetary systems. Without efficiency measures, organizations risk entropy and chaos. Without effectiveness measures, there would be no feedback to fine-tune organizational actions. However, considering such measures alone will only reflect a partial and biased evaluation.

Name thesis:degree_name

Master of Science

Level thesis:degree_level

masters

Discipline thesis:degree_discipline

Industrial and Systems Engineering

Department dc:contributor.department

Industrial and Systems Engineering

Grantor dc:publisher

Virginia Tech

Year dc:date.issued

1992

Author dc:creator

• Masri, Maher H.

Statement dc:rights

• In Copyright

Licence dc:rights.uri

• http://rightsstatements.org/vocab/InC/1.0/

Language dc:language.iso

en

Dc Identifier Other

etd-08222009-040421

OAI identifier oai:identifier

oai:vtechworks.lib.vt.edu:10919/44394