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Multiple facets of budgeting: an exploratory analysis
Stephen C. Hansena, Wim A. Van der Stedeb,∗
a School of Business and Public Management, George Washington University, Washington, DC 20052, USA
代写留学生论文b Leventhal School of Accounting, University of Southern California, Los Angeles, CA 90089-0441, USA
Received 8 September 2003; accepted 16 August 2004
Abstract
This paper investigates four potential reasons for budgeting in organizations (operational planning, performanceevaluation, communication of goals, and strategy formation), their antecedents (e.g., organizational strategy andstructure), and several budgeting characteristics (e.g., target difficulty and budget emphasis) that potentially influencethese reasons-to-budget’s performance. While the idea of multiple uses of budgets in organizations is not new, therationale for this study is that prior research has tended to look at the same (one) reason for budgeting (primarilyperformance evaluation), or at only one reason in isolation. Based on survey data from 57 managers responsible forpreparing the budget for their organizational unit, our analyses suggest that while the four reasons-to-budget exhibitoverlap, they are also substantively unique in their own use. Moreover, we demonstrate that the reasons-to-budget
arise in different circumstances and that each reason-to-budget’s performance is associated with different budgetingcharacteristics.We also demonstrate a link between the performance of the individual reasons-to-budget and overallbudget satisfaction and organizational unit performance.
Keywords: Budgeting; Planning; Management control; Performance evaluation
1. Introduction and overview
Budgeting is an important control system in almost all organizations (Armstrong et al., 1996; Ekholmand Wallin, 2000; Merchant and Van der Stede, 2003) and there continues to be an extensive amount ofwork devoted to understanding how it works. Most prior studies, however, have focused on the allegeddysfunctional consequences of budgetary controls in the context of budget use for performance evaluation
(Hartmann, 2000; Hope and Fraser, 1997, 2000, 2003; Jensen, 2001; Marcino, 2000; Schmidt, 1992),but there has been considerably less focus on other budget uses in organizations, such as for operational
planning and strategy formation. These neglected budget uses are important, as many of the recent calls forimproving traditional budgeting processes focus on their lack of connection with strategic and operationalplanning (Hansen et al., 2003). Moreover, while the idea of the existence of multiple uses of budgets isnot new and has been discussed in standard textbooks (e.g., Garrison and Noreen, 2003; Horngren et al.,2003), prior research has tended to look at the same (one) reason for budgeting (primarily performanceevaluation) in isolation. It is not clear, however, that when an organization budgets to plan operations, ittakes the same approach (e.g., with respect to budget target difficulty) or considers the same circumstances(e.g., with respect to uncontrollable factors in the environment) than when it budgets to collect strategicinformation or to evaluate managers’ or their units’ performances.

3.2.2.3. Operating environment. We use three scales to measure the characteristics of the unit’s operatingenvironment.9 First, we use a measure of the production/task type from Krumweide (1998), which captures
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