Shortfalls of using budgets for Performance evaluation of staffs

Contents
Shortfalls of using budgets for Performance evaluation of staffs...............................2
Reasons for use of the budget in the Hospitality Industry..........................................3
Problems related to using these budgets :.................................................................4
References................................................................................................................. 7

Shortfalls of using budgets for Performance evaluation of staffs
1) Discouragement
It may be the chances that the budget process is not a pleasant experience,
so it has the potential to discourage staff. Moreover the standard set in the
budget may be unrealistic or too optimistic .As the budgets are normally
prepared by senior level management based on their own assumption , so it
might not suit the lower level management and may discourage their
performance . (Freedman, 2019)
2) Changes in government rules and regulation may require immediate
changes or review of budget which in turn cost more time and money.
3) Inconsistent Message
As we all struggle with memory as we are busy as so it becomes critical to
document issues (both positive and negative) when it is fresh in our minds.
But managers usually does not keep notes and accurate records of employee
behavior, thus may not be successful in sending a consistent message to the
employee leading to bad preparation and allocation of budgeted task.
4) Wrong Use of Past Trends
Budgets are usually prepared from past dates and trends of staff
performances , but if the data are not analysed efficiently and correctly then
it may cause wrong performance evaluation of staffs.
5) Not much participation from staff members :
As the budget usually defines a particular process of doing a particular job
and the time limit within which a job should get completed , hence lower level
managers and staffs are not interested in adding any comment to the
budget. Moreover ,sometimes high level managers ignore the fact of
participation by the staffs.
6) Time Consuming
It is recommended that a manager spend about an hour per employee writing
performance appraisals and depending on the number of people being
evaluated, it can take hours to write the department’s PA but also hours
meeting with staff to review the PA. On the basis of this , budgets are usually
prepared and task allocation is done , hence the it is too time consuming.

7)Unfortunate events :
As the budgets are prepared keeping in mind the assumption of unfortunate
event not to occur but in real scenario this is not the story. Unfortunate
events like natural disaster or breakdown of machinery or any type of
accident may occur, so this may cause the budget not to be achieved and if
the senior managers are not cooperative and understanding , this may cause
difference in the evaluation of staffs .
8) Over estimate / under estimate
A Managers usually makes mistake while preparing budgets by either over
estimating or under estimating the budget . From both point of view both
issues are identified as a bad influence in evaluating budgets.
9) Lack of communication gap
Lack of communication gap between top level management and bottom level
management may also create problems in assigning task and evaluating
staffs.
Reasons for use of the budget in the Hospitality Industry
The use of budget and budgetary control has become a crucial part of the
Hospitality industry accounting as it is used as a benchmark to measure their
performance and helps to succor in this competitive market by performing as a
successful player by setting up their financial target. This industry comprises hotels
and other accommodations, restaurants, fast food retail, bars, and catering.In the
21st century the business of hotel is growing at a rapid pace.
Gareth Owen (1998) has explained the full budgetary process in the hotel business
by drawing a layout of full budgetary cycle.
o Environmental Influences audit
o Internal resources audit
o Actual result
o Master Budget
o Departmental Budget (Budgeting in the Hotel Industry, 2019)
o Strategic Plan
o (3-7) years
o Annual Business plan
o Long term Strategic Gap
o Short term Operational gap
The budget provides following benefits to hospitality industry :