Budgeting Characteristics and Their Potential Outcomes - Quantitative Study of Large Norwegian Companies

The annual budget has a long tradition as a management system. Budgeting literature states that despite fairly harsh and extensive criticism the budget is still emphasised in most organisations. I have examined how budgeting characteristics, mainly budgeting format and budgeting roles, have potential effect on budgeting outcomes through a quantitative approach One of the main assumptions made are that those who have advanced from traditional budgeting practices (Radical Budgeters) would experience positive outcomes, as they are “fixing” the budgeting issues. Through a survey I find that most Large Norwegian Companies, still apply relatively conservative budgeting practice, few apply more flexible budgeting, and a small proportion have abandoned the budget altogether. This is consistent with similar investigations performed the past 20 years. When relating the budget formats to outcomes, Radical practices was found to be associated with lower performance and higher budget satisfaction, while Conservative practices was found to associate with higher performance and lower budget satisfaction. The results appear to be contradictory to the assumption, however I argue that Radical practices could potentially add more value (higher satisfaction) to those who are successful with implementation, although this does not translate to higher performance. Budgeting systems are not assumed to predict much of the performance measure, as there could be a range of other factors affecting this aspect. The performance measure used is a subjective report of financial measures and should be taken into consideration. A main caveat to my research is the degree of conceptual overlap. Differences within practice, and a gap between this and budgeting literature, makes the terminology ambiguous and difficult to navigate. Thus, the finding of most significance is perhaps that of a disparity between Conservative/Radical practice. Although I cannot say anything about causation of performance outcomes, the significant associations found gives a strong indication for the validity of this classifications and their distinct patterns