A Research On The Implementation Mechanism Of Budget Functions

As an important control system budgeting is widely used in organizations’ management practice. China’s organizations have their characteristics in their management mode of operation, and it has been developing with the carrying forward of market-based reform. One of the basic issues of budgeting is budget functions, that is, the role of budgeting and how does it affects the performance in business. The starting point of this research is budget functions, and through deep investigation in ZGEZ, we try to find the implementation process of budget functions and the factors that influence the process. As a result, we prove that ZGEZ uses budgeting to act some roles and its budgeting process is influenced by some certain factors such as external conditions and organization structure, which is consistent with prior literature. It is not enough to prove the existence of these issues, so we dig deeper by using grounded theory to find out how they make things happen.There are six parts in this paper:Chapter1:Introduction. Traditional budgeting has been in discussion for its lack of connection with strategic and operational planning."Better budgeting" and "Beyond budgeting" are put forward as two forms of budgetary reform. Years of practice in organizations proves that budgeting still acts an important role and it will make sense to investigate how organizations use budgeting to approach their goals. Most prior studies have focused on the factors that influence budgeting process in isolation, or the choices of organizations when facing different external conditions, but there has been considerably less focus on how these factors and conditions influence budgeting uses. This paper investigates into ZGEZ by carrying on interviews among managers and employees about organization’s use of budgeting, and then we use grounded theory method to analyses the process and mechanism of the implementation of budget functions. Chapter2:Literature review. Prior literature has discussed a lot about budget functions. They can be classified into two parts:functions that used for organizational control (such as performance evaluation and motivation), and functions that are decision-making related (such as planning and communication). For those functions, one organization could not use them all, because of the conflicts between them. So organizations should make choices according to their own conditions. Based on contingency theory, we take external environment, internal environment and budgeting characteristics as our first concern to investigate their influence on budget functions.Chapter3:Study design. This chapter introduces in details about the research method and the basic information of data collection.Chapter4:Field study. In this chapter, we quote the words from the interview to prove the existence of the issues mentioned in literature review and theory analysis. Among the external environment, the factors that exist in practice of ZGEZ are:the uncertainty of the market, competition and organization life circle. Internal environment factors are organization structure and size. Budgeting characteristics include participation, budget target difficulty and budget strategy link. The budget functions used in ZGEZ are operational planning, resource allocation, communication of goals and performance evaluation.Chapter5:The application of grounded theory. After the definition of factors in this research, we approach to the core part which is, using grounded theory to analyze data and build a theory of the implementation mechanism of budget functions, which includes3systems:Sensation-of-Environment System, Control-of Operation-Flow System, Feedback-of-Performance-Evaluation System.Chapter6:Conclusions. This research takes ZGEZ as a case of field study and through which to get the first-hand data. By using grounded theory, the systems are constructed, they are Sensation-of-Environment System, Control-of-Operation-Flow System, Feedback-of-Performance-Evaluation System. Each system is essentially dynamic so that they may interact with each other. This research finds the causes and effects of budget functions and the ways of their interactions, of which the dynamic systems consist.This research has its practice value and theoretical significance for several reasons: (1) Innovation of research perspective. We carry on a field study to get deep thoughts about the implement mechanism of budget functions, and in this way we try to make better and profounder conclusions.(2) Breakthrough of study method. The using of grounded theory method makes out research more reliable and scientific than simple case study, In comparison with empirical studies, field studies do better jobs in their integration with practice.(3) Theoretical contribution of research conclusions. The three systems(Sensation-of-Environment System, Control-of-Operation-Flow System, Feedback-of-Performance-Evaluation System) together make the implementation mechanism of budget functions. Conclusions of this research have rounded out the theories in budgeting and their practice value is to be proved.The limitations of our research are:Subject in our study is one organization which makes our conclusions may not applicable in others. The strictness of this research may not so strong because of the researcher’s limit theoretical level and research skill. Research opportunities lies on the expanding of investigation scale and the data can be collected by some other research method such as survey to strengthen the strictness.