Page 140 - DLIS406_ACADEMIC_LIBRARY_SYSTEM

Unit 13: Control Techniques

• Provides a basis for performance appraisal (variance analysis). A budget is basically a Notes
yardstick against which actual performance is measured and assessed. Control is provided
by comparisons of actual results against budget plan. Departures from budget can then
be investigated and the reasons for the differences can be divided into controllable and
non-controllable factors.
• Enables remedial action to be taken as variances emerge.

• Motivates employees by participating in the setting of budgets.
• Improves the allocation of scarce resources.
• Economises management time by using the management by exception principle.

13.1.2 Problems in Budgeting

Whilst budgets may be an essential part of any marketing activity they do have a number of
disadvantages, particularly in perception terms.
1. Budgets can be seen as pressure devices imposed by management, thus resulting in:
• bad labour relations
• inaccurate record-keeping.

2. Departmental conflict arises due to:
• disputes over resource allocation
• departments blaming each other if targets are not attained.

3. It is difficult to reconcile personal/individual and corporate goals.
4. Waste may arise as managers adopt the view, “we had better spend it or we will lose
it”. This is often coupled with “empire building” in order to enhance the prestige of a
department.
Responsibility versus controlling, i.e. some costs are under the influence of more than one
person, e.g., power costs. Managers may overestimate costs so that they will not be blamed in
the future should they overspend.

13.1.3 Characteristics of a Budget

A good budget is characterised by the following:
• Participation: involve as many people as possible in drawing up a budget.
• Comprehensiveness: embrace the whole organisation.
• Standards: base it on established standards of performance.

• Flexibility: allow for changing circumstances.
• Feedback: constantly monitor performance.

• Analysis of costs and revenues: this can be done on the basis of product lines, departments
or cost centres.

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