Budgetary Control Is Part of Overall Organisation Control and Is Concerned Primarily with the Control of Performance. the Use of Budgetary Control in Performance Management Has of Late Taken on Greater Importance

“Budgetary control is part of overall organisation control and is concerned primarily with the control of performance. The use of budgetary control in performance management has of late taken on greater importance especially as a more integrative control mechanism for the organisation”. Critically evaluate this claim, supporting your discussion with both theoretical arguments and practical examples

Introduction

In general, budgetary control is major part of overall organisational control (Otley 1999; Bhimani et al. 2012). It has become increasing important especially with the growing importance of the capital market. However, it does not come without implications and problems. Advocates have argued that budgetary control should be replaced with other techniques altogether (Bunce, Fraser & Woodcock 1995; Bhimani et al. 2012). This essay will go on to discuss the framework of budgetary control followed by its implications and suggestions.

Organisational Control

Organisational control can be defined as measures taken by the organizations to influence its employees to behave and act congruently to the organisation’s goals (Flamholtz, Das & Tsui 1985; Bhimani et al. 2012). Organizational control systems are techniques and processes that will increase the probability of them doing so (Flamholtz, Das & Tsui 1985).

Budgetary Control

A budget is a quantitative plan that is set for a general time frame of one year. It can be used to do the following -

Plan - A budget translate general plans into specific and quantitative plans (Walther 2013). A budget also provides feedback to the managers about the effects their strategic plans (Bhimani et al. 2012). For example, managers may have plans to build a new factory at a particular location. After doing the budget, it might dawn upon them that the rent cost of the location may be too steep and prompt them to consider a separate location.

Evaluate – Budgets also helps managers to evaluate the actions and...