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Victoria University of Wellington

1. Scott, Graham. A Theory of Constraints analysis of organisational budgeting processes: International research and New Zealand managers' perceptions.

Degree: 2020, Victoria University of Wellington

The purpose of this research was to use the Theory of Constraints (TOC) Thinking Processes (TP) to examine the problems and issues associated with Traditional Budgeting in organisations. TOC gave a framework to look at the causality of the problems, identify missing entities, and test solutions. The research was structured in two phases. Phase one sought to organise the problems identified in the literature review using the logic-based framework of the Theory of Constraints (TOC) Current Reality Tree (CRT) to better understand the interactions and causality between the various problems reported. During phase two, interviews were conducted in two Not-For-Profit organisations to test the existence of these problems, the interactions of the problems in the organisations and to see if the literature-informed Current Reality Tree reflected managers’ perceptions, and to find any further causality. The findings revealed that the managers of these New Zealand organisations perceive they face the same problems as those outlined in the literature. In particular, the budgeting process is felt to be a time-consuming exercise, that causes competition between budget holders for funds, disempowers staff, lowers strategic focus, and “wastes” money as budget holders build in contingency and then spend it. These problems occur because costs are often unpredictable and there are often negative consequences for getting budget figures wrong. The findings indicate that organisation governors and upper management want certainty of costs, so they use planning and reforecasting to get it. The findings also indicate that the managers of the budgets want certainty on delivery of outputs and add contingency to their budgets to get it. The actions of Leadership use up time and the actions of managers use up money. There is therefore an increase in the internal competition for time and money, which causes siloing of departments, less focus on strategy, and disempowering of staff. The findings indicate that managers add contingency to their budgets and can then use it because expenses vary in their level of predictability and in how discretionary they are. Unpredictable costs that cannot be deferred can be the most dangerous for budget holders and cause the most pressure to add contingency. Budget holders can then use this contingency along with the deferral of some types of expenses to keep themselves within budget if expenses are higher than anticipated. Conversely, other expenses may be brought forward or inflated to use up any excess contingency. Alternative budgeting methods like Activity Based Budgeting, Zero-Based Budgeting, Rolling Forecasting and Continuous Budgeting focus on planning and reforecasting to get certainty. The approach known as Beyond Budgeting may reduce the budgeting workload requirement, which then frees up time and therefore empowers managers. Strategic Budgeting overcomes unpredictability by aggregating the contingencies in the individual budgets into a central buffer so that not all funds are allocated before… Advisors/Committee Members: Mabin, Victoria, Bates, Ken.

Subjects/Keywords: Theory of Constraints; Budgeting; Current Reality Tree

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APA (6th Edition):

Scott, G. (2020). A Theory of Constraints analysis of organisational budgeting processes: International research and New Zealand managers' perceptions. (Masters Thesis). Victoria University of Wellington. Retrieved from http://hdl.handle.net/10063/9112

Chicago Manual of Style (16th Edition):

Scott, Graham. “A Theory of Constraints analysis of organisational budgeting processes: International research and New Zealand managers' perceptions.” 2020. Masters Thesis, Victoria University of Wellington. Accessed September 20, 2020. http://hdl.handle.net/10063/9112.

MLA Handbook (7th Edition):

Scott, Graham. “A Theory of Constraints analysis of organisational budgeting processes: International research and New Zealand managers' perceptions.” 2020. Web. 20 Sep 2020.

Vancouver:

Scott G. A Theory of Constraints analysis of organisational budgeting processes: International research and New Zealand managers' perceptions. [Internet] [Masters thesis]. Victoria University of Wellington; 2020. [cited 2020 Sep 20]. Available from: http://hdl.handle.net/10063/9112.

Council of Science Editors:

Scott G. A Theory of Constraints analysis of organisational budgeting processes: International research and New Zealand managers' perceptions. [Masters Thesis]. Victoria University of Wellington; 2020. Available from: http://hdl.handle.net/10063/9112

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