Global Econamy

McKinsey (1922) pointed out that nowadays management’s philosophy revolves around the idea of planning and chief executives have come to the realization that today’s task can only be properly fulfilled thanks to the meticulous planning of yesterday. The budgetary control framework has been openly accepted and widespread as a tool for management and overall organisation control. Also, recent evolutions in the managerial sciences have come to jeopardize the reliability of budgeting as an effective method for the control of performance and organisation. This essay will aim to evaluate whether budgetary control is concerned primarily with the control of performance, as well if it has of late taken on greater importance especially as a more integrative control mechanism for the organization. Therefore it will firstly define the meaning of budgetary control and performance management. Secondly it will evaluate the use of budgetary control as a tool for today’s organization, and how traditional budget control, time-adjusted budget control plays its part in performance management. Thirdly it will follow debates and criticisms on its the effectiveness and use and Lastly it will conclude by assessing to what extent budgetary control has become a more integrative control mechanism for organisations. The work of key specialists in management such as Bhimani, Otley, Van der Stede and McWatters, will be drawn on in order to cover the key issues of the discussion.

To start the discussion of budgetary control, it is important to understand the two key terms that will be used in this essay: ‘budget’ and ‘budgetary control’. According to Bhimani et al. (2008) “a budget is a quantitative expression of a proposed plan of action by management for future time period and it is an aid to coordination and implementation of the plan”. On the same line McWatters et al. (2008) highlights the importance of budgets as a planning control system for a company, which ‘translate’ organisational...