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PROBLEM:
- The shortcomings of review and approved the budgets of the ring divisions; - The significant (incorrect) increase in the budgets of two staff departments. To whom is it a problem? It is a problem for the entire organization. But especially for King James who works at the Department of Budgeting. Why is it a problem? A lack of doelcongruentie the staff departments not perform optimally in the interests of the organization. Where lack? -Evaluation of budgets (monthly); - Performance based on available budgets compared to actual results; - No responsibility for results in the divisions; - A reward system for corporate departments.
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The case study provides a brief idea about the issues regarding the budget evaluation inWestport Electric Corporation. Over the years the amounts necessary to run the operations has been increasing as compared to the previous year and that is a concern for the authorities.Though they have various methods of evaluating the budget, the increasing expenses didnt seem to be under control. According to a supervisor, James King, the budget should be approved only when it is found that the budget is sufficiently tight. There has to be a deep discussion, raising every issueregarding the expenses to find out where can be the cost cutting done. Any personal favours to approve any kind of budget for the respective department should be stopped and theconcerned authorities should look into that matter. The departments which show laid back behaviour but still ask for a raise in the budget should be taken under scrutiny and see if the efficiency of such a department can be increasedwithout increasing the amount of their budget. Or such kind of work can be contracted out toa third party for better results. The employees in the case study didnt seem to be satisfied with the kind of trainings taken by the IR department. The funds were getting wasted in such kind of trainings which were nogood for anyone. The authorities need to look into the workings of such departments and findout how the functions can be made more practice and viable. The employee participation is important in identifying the issues in the organisation and this can work only when the employees are not afraid to talk about it so a system is necessary where the employees can dodge complaints regarding the work or inefficiency of the departments. Finally, it reverts to the knowledge and capability of the higher authorities to evaluate the budget properly and provide necessary suggestions.
Prepared by: Milan Padariya, 63-MBA(Pharma) Page 3
efficiency and effectiveness of each business division. Currently, it appears that focus
is given simply on bottom line numbers; that is, each units financial success is assessed solely on the basis of how handsome the profits brought in for the company, without being given much performance evaluation as is needed in any organization. Being distinct profit centers, both revenues and costs must be calculated for each
business segment. It is important to note that while the individual divisions may report the
most exorbitant of profit figures, the numbers do not carry with them as much meaning as when these are put into context. As in the case of Westport Electric for instance, Kelly is quick to point out that the company is certain to do better trimming down budgets handed to certain divisions such as legal department and the Industrial relations According to him the training given by the IR division is
and the divisional controller should raise their opinion / objections to the proposed budgets if they believe it is not sufficiently tight.
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