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Legitimising budget flexibility whilst maintaining financial control: evidence from a multinational organisation
Natalie J Frow, University of Warwick
David E W Marginson, Cardiff University
Stuart G Ogden, University of Sheffield
ABSTRACT. Budgets are not renowned for their flexibility. Yet, it is clear that budgets must increasingly operate in circumstances which demand flexibility. This is particularly true at the level of the individual, where a manager may be obliged to sacrifice budgetary targets for ‘strategic reasons’, when faced with competitive conditions that demand a high rate of strategic adaptation. However, these same conditions create a need to exercise ‘tight’ cost control. Drawing on case study evidence, our aim is to explore how organizations seek to address these seemingly contradictory imperatives through the management control process. We analyses what we describe as the “legitimisation of budget flexibility”, where managers are able to forgo short-term budgetary targets in circumstances where estimates of doing so are expected to yield greater financial benefit over the longer-term. The implications of such a change for both the theory and practice of budgetary control are considered.
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