Performance Management and Control
Zero based budget
This report is analysing University of West London’s new budgetary process for 2012
When preparing the budget in UWL, it is useful for reconciling the conflicts between the components of UWL’s management team. In some situations, UWL top management group can use power to process the budget. Conflict means disagreement between team members (Usha, 2011). According to Mind Tools (2011) five main styles to deal with conflicts were identified by Kenneth Thomas and Ralph Kilmann in 1970. In different situation different styles will be useful.
Competitive: This is where top management groups operate using their power to make some decision quickly and when decisions have to made fast.
Collaborative: When one tries to meet all UWL members needs/wishes. In this style top management group can bring all members viewpoints together and make best budget. Compromising: Decisions which will at least partly satisfy everyone is made by the decision team
Accommodating: This style specifies a willingness to meet other UWL member’s needs at the expense of the member’s own needs. Mostly this style won’t help to get good outcome in budget decision.
Avoiding: Normally it is not acceptable in real.
According to Mind Tools (2011), “Interest-Based Relational Approach” theory is giving good idea for reconciling the conflicts. According to this theory firstly top management group has to make a good relationship with the UWL members and have to keep problem and members separately, it will help to work without damaging working relationship. Top management group must concentrate on the member’s interest and have to understand why they are pointing suggestions. With all members’ participation and communication support department work charge of 60% can be solved without any conflicts. In participative decision making process committee members can improve team effectiveness, can give their ideas and perspectives regarding support department charges. The participation committee can achieve better results and each member can relate to team decision.
Leloup (1988, cited by Hildreth, 1996), stresses the point that two board theories capture that thinking: “bottom up” and “top down” approaches to decision making. Bottom up budgeting starts from fragmented decision making by low level members who build the budget process from bottom up. In top down budgeting, top management team force total controls, by limiting the role of lower level members in setting economic goals.
In the top bottom down approach there will be conflicts and budget won’t include all the points which lower members wish to have. However some short of power is required to control the committee member’s arguments. Hendrick (1992, cited by Hildreth, 1996) stresses the point that most of the successive organisations follow the bottom up approach in budgetary process. Mostly the final budget is the totally accepted budget and there won’t be any conflicts.
Zero Based Budgeting (ZBB)
Zero based budgeting approach requires that all activities are prioritized and justified before the decisions of each activity’s recourse allocations. Zero based budgeting starts from zero and every activity which takes place inside the company/group is analyzed for its costs and requirements. Budgets are then constructed according to the needs for future stage (Colin, 2008). Dave Ramsey, cited by Sam...
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