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Article Excerpt
The value of the budgeting process has been the subject of intense debate over the past few years. In their 2003 book, Beyond Budgeting, Jeremy Hope and Robin Fraser suggest that the traditional budgeting process is outdated and dysfunctional and, therefore, should be abandoned. (1) Alternatively, a 2007 survey by Theresa Libby and R. Murray Lindsay offers evidence that senior accounting and finance managers find the budgeting process to be more helpful than harmful overall and that there is a perception that operating managers could not function well without budgets. (2)
The Libby and Lindsay study provides answers to some important, but general, questions regarding the budgeting process, including whether accounting and finance managers' organizations planned to abandon budgeting and whether respondents agreed with some of the major criticisms of the budgeting process.
We conducted a follow-up survey to the Libby and Lindsay study with the goal of providing answers to some more-detailed questions:
* How are budgets in modern (for-profit) organizations prepared? That is, what are the descriptive characteristics of the budgeting process as used today?
* Does budgeting add value for organizations? If so, how?
* How satisfied are finance and accounting managers regarding the role that budgets play within an organization?
* What are the primary behavioral consequences, both positive and negative, of using budgets?
* What is the relationship, if any, between budgets and other management processes--i.e., are they integrated in any meaningful sense?
THE SURVEY
In November 2007, questionnaires were sent via e-mail to 29,501 members of the Institute of Management Accountants (IMA[R]) who, based on job title, were likely involved in the budgeting process. These members included general management, corporate management, public accounting, general accounting, cost accounting, and environmental accounting staff members. Participants were asked to respond to questions based on their position in the organization (i.e., "company-level" or "segment-level," where "segment" was defined variously as a subsidiary, division, department, or product line).
A total of 815 members completed the survey. Because the focus of our study was for-profit entities, as with the Libby and Lindsay study, we excluded responses from managers at nonprofit or governmental entities. This resulted in a final sample of 720 respondents who worked at publicly traded corporations (52.5%), privately held corporations (42.4%), and partnerships (5.1%), mostly in the United States.
Approximately 48% of respondents work at the corporate level, with the remainder at the segment level. The highest percentage of respondents was in manufacuturing (28.1%), followed by healthcare (9.9%). In regards to company size, the largest percentage of respondents (35.7%) reported company revenues between $1 billion and $50 billion and segment revenues between $50 million and $500 million (34%). The largest group responding to our survey was controllers (25.5%). On average, our respondents had...
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