Management Styles (Hopwood)
Hopwood looked at different management styles and approaches to using budgets.
Behavioural aspects of budgeting
Individuals react to the demands of budgeting and budgetary control in different ways and their behaviour can damage the budgeting process.
Behavioural problems are often linked to management styles, and include dysfunctional behaviour and budget slack.
Management styles (Hopwood)
Research was carried out by Hopwood (1973) into the manufacturing division of a US steelworks, involving a sample of more than 200 managers with cost centre responsibility. Hopwood identified three distinct styles of using budgetary information to evaluate management performance.
| Management style | Performance evaluation | Behavioural aspects |
| 1.) Budget constrained style | - Manager evaluated on ability to achieve budget in the short term
- Manager will be criticised for poor results. For example, if spending exceeds the limit set
| - Job related pressure
- May result in short-term decision making at the expense of long term gain.
- Can result in poor working relations with colleagues
- Can result in manipulation of data
|
| 2.) Profit conscious style | - Manager evaluated on ability to reduce costs and increase profit in the long term.
- For example, a manager will be prepared to exceed the budgetary limit in the short term if this will result in an increase in long term profit
| - Less job related pressure
- Better working relations with colleagues
- Less manipulation of data
|
| 3.) Non-accounting style | - Manager evaluated mainly on non-accounting performance indicators such as quality and customer satisfaction
| - Similar to profit concern style but there is less concern for accounting information
- Requires significant and stringent monitoring of performance against budget
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Created at 6/7/2012 4:14 PM by System Account
(GMT) Greenwich Mean Time : Dublin, Edinburgh, Lisbon, London
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Last modified at 9/10/2013 3:30 PM by System Account
(GMT) Greenwich Mean Time : Dublin, Edinburgh, Lisbon, London
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