Investigating the Behavioral Dimensions of Budgeting in Public Sector

This essay examines the significance of behavioral aspects in public sector budgeting, highlighting how understanding these factors can contribute to successful budget preparation and resource allocation. It explores the impact of budgeting on human behavior, including motivation and potential dysfunctional behaviors, and analyzes the public sector budgeting process, emphasizing the need to address beyond budgeting issues in the 21st century. The literature review reveals varying views on the benefits of participatory budgeting versus non-participatory approaches, underscoring the importance of considering both technical and behavioral dimensions for effective budget implementation. The study concludes by recommending strategies for aligning employee attitudes with organizational goals to enhance budgeting outcomes.

Running head: EXAMINATION OF BEHAVIORAL ASPECT IN BUDGETING 1
Examination of Behavioral Aspect in Budgeting (Public Sector)
Student’s Name
University’s Name
Author Note:

EXAMINATION OF BEHAVIORAL ASPECT IN BUDGETING 2
Executive Summary
Budgets are considered as a main part in designing the management control, for the
purpose of promoting the efficient usage of the resources and offering support for the critical
functions. The success of any budget is dependent on the acceptance and the attitude of the
people who are going to work on it. This research article focuses on the role that is being
played by the behavioral factor of the budget. It also focuses on how an understanding of
such factor contributes towards the success of the budget preparation. This research article
reveals why budgeting is essential for a company and illustrates the impact budgeting has on
human behavior like motivation and the dysfunctional behaviors. Public sector budgeting
process is basically analyzed which is focused on the need of tackling beyond budget issues
in 21st century. In the literature review analysis, it was analyzed with the help of analysis that
there was no such means of ensuring the successful process of budgeting. It was identified
that there were concrete views on the factors associated with the participation benefits in
opposition to non -participation factors.
Keywords: Budgeting, Behavioral aspect and public sector

EXAMINATION OF BEHAVIORAL ASPECT IN BUDGETING 3
Contents
Executive Summary...................................................................................................................2
Introduction................................................................................................................................4
Literature Review.......................................................................................................................5
Findings......................................................................................................................................9
Conclusion................................................................................................................................10
Recommendation......................................................................................................................10
References................................................................................................................................11

EXAMINATION OF BEHAVIORAL ASPECT IN BUDGETING 4
Introduction
Every company, irrespective of the size relies on the budgets and the system of
budgetary for achieving the strategic goals. The success factor of the budget lies in the
analysis of the goals and vision of a company and the implementation of the strategies.
Budget is considered as a technique of management accounting that offers good results only
if it is understood and implemented properly (Pamela & Frank, 2010). The procedure of
budgeting comprises of establishment of strategic goals and goals for the sales, cost,
production and the cash flows (Harold, 2010). The result of the entire procedure is the
preparation of the main document which is considered as budget. As per the study by Ndlovu
(2015), budget is nothing but a part of quantitative analysis for the purpose of gaining
company’s objectives. The main objective with which budget is prepared is aiding in the
achievement of the objectives and management in the company. However, it is considered
that there are mainly two types of aspects, technical and behavioral aspects associated with
budget preparation that affects the probability of its success in a huge manner.
Though, the technical aspect is emphasized to be important (Surianti & Dalimunthe,
2015). Pamela & Frank (2010) revealed in his study that the determination of behavioral
aspect of budgeting is also important, if congruence is to be acquired. Companies need to
recognize that the efficient usage and implementation of the budget is mainly associated with
the extent to which people working in the company stands in favor of the budget preparation
in accordance with the goals of the company.
Objectives
This research study targets to examine the behavioral aspect in budgeting.

EXAMINATION OF BEHAVIORAL ASPECT IN BUDGETING 5
Reseach Question
The resrecah study fouces on determining whether budgeting is affected by behavioral
aspects.
Literature Review
A budget document is a formalized document which includes various statistical and
analytical data aimed at helping the company achiev their setobjectives. They basically act as
a road map in the strategic selection and its implementation. However, during the time of
preparation of the budget, it acts as a controlling device by the management people. Some of
varied roles played by the budget factor, which helps in offering a platform base for the
successful functioniong of business operations have been mentioned below (Irene, 2010):
 The procedure followed in budget preparation offers a foundation for the
implementation of the strategies, which makes sure that the strategies are
implemented with the objective of optimum utilization of resources (Pamela & Frank,
2010); .
 The process followed in budget preparation, helps in fostering the coordination factor
in varied operational units of the company. This factor helps in promoting
communication and making association io between the departments more easy and
understandable. Through this process, it becomes easy for managers to attain the goal
(Sage, 2015).
 Budget preparation looks forward to acquiring optimum usage of resources and
awareness of cost factors for becoming relevant (Harold, 2010). However the main
challenge lies in quantification.
A difference of the actual result against the projections of budget offers a base for
evaluation of performance and signals areas that require corrective actions. This type of
comparison can be quite meaningful as it determines the variances and investigations.

EXAMINATION OF BEHAVIORAL ASPECT IN BUDGETING 6
Motivation can be considered as the fuel that helps the employees working in the company in
achieving strategic objectives that givern the success of any company (Irene R. S., 2010) ;
(Pamela & Frank, 2010). Gaining the congruence of goals is mainly an issue of behavior.
Involvement of employees in budget preparation is important as such involvement helps the
company in offering its employees some sense of purpose (Pamela & Frank, 2010).
Budgets and Behavior of Human
The controlling factor of the company depends on the fact that how well the actions of
the company are being managed by the senior officials of the company. Howevre, it also
depends on the relationship in between hierarchy intervals. Management accountant in the
budgeting process can mainly motivate the employees and enhance the attitudes of the
managers of the company towards the control of budgeting. There are three approaches that
can be employed in the development of the data budget preparation (Surianti & Dalimunthe,
2015).
 Imposed budget is a kind of autocratic budgets wherein the top management
decides the contents of the budget. In such case, the subordinate staff has to follow
the rules of execution of the budget (Harold, 2010).
 Participative budget, are types of budgets that are democratic in naturewherein the
low level management is basically empowered owing to the contribution of the
budget.
 Negotiated budgets on the other side adopts both imposed budgets and participative
budgets and develops environment where there are shared responsibilities for the
preparation of the budget (Arnold & Gillenkirch, 2015).
The approaches discussed above depend on the style of leadership and the nature of the
company. It is considered that preparation of budgetby adopting participative and negotiated
approaches would mainly elicit huge support from the workers. Simply engaging the pretext

EXAMINATION OF BEHAVIORAL ASPECT IN BUDGETING 7
or consulting with the managers prior towards establishment of the goals of the budget is not
considered as participation.
Study done by Noor, Haryanti, & Othman (2012) reveals that many budget schemes
have been criticized for offering real participation level and contributing little value. Noor,
Haryanti, & Othman (2012) also revealed in his study that the participation factor of budget
needs to comprise of positive spirit in every such aspects which are associated with the
designing of the system and corrective actions (Noor, Haryanti, & Othman, 2012). Other
researchers like (Shutibhinyo, 2013) also depicted the impact developed by the budget on the
job associated behavior which depends on the way in which managers use the budget rather
than on the technical designing of the budget (Noor, Haryanti, & Othman, 2012). There are
researchers that have determined the assessment of the human behavior with the help of the
protagonist, which assesses the impact of the discretionary behavior of the management level
people on the information collected. In such type of theories, the main assumption undertaken
by the researchers is associated with the human behavior, which is examined by relationship
in between agent and principals (Noor, Haryanti, & Othman, 2012). Such type of theories are
helpful in analyzing the issues pertaining to information collection (Noor, Haryanti, &
Othman, 2012; Irene, 2010).
Examination of Behavioral characteristic of Process of budget
The level of participation needs to start with the level of job difficulty in the company.
The study done by (Bakar, Amiruddin, & Auzair, 2014) shows that the factor of participation
has been effective when the difficulty in the job and level of participation was at the high.
However, the case was opposite when difficulty level was found low (Bakar, Amiruddin, &
Auzair, 2014). In the case when job seems to be an easy task, then imposed budget are better
in implementation. The other side (Jaakson & Kallaste, 2014) reveales that participation
chemistry might lead to acceptance, but behavioral factor might outweigh the advantages that

EXAMINATION OF BEHAVIORAL ASPECT IN BUDGETING 8
are being used by managers and it can further size the opportunities to bias estimates. Thus, it
is very important for the company to understand cost benefit analysis and draft the same and
thereby gaining ways of clear communication for the purpose of maintaining (Jaakson &
Kallaste, 2014). Participation level in the budget preparation needs to be oriented towards its
purpose and benefits while tempting to neglect the negative views and minimizing the
dysfunctional behaviors of human beings (Jaakson & Kallaste, 2014). On the other side,
clear objectives of budget preparation, rules drafted, responsibilities of employees and
various other factors should be communicated in an effective way to the managers (Jaakson
& Kallaste, 2014; Klemstine & Maher, 2014).
Public Sector Overview
There are huge similarities in between the preparation of the public sector budget and
preparation of private sector budgets. The main differences lie in the fact that public budgets
are instruments of government agencies and are not designed with the objective of
profitability. In the public sectors, the operational managers are the ones that input resources
in the budget unlike the counterparts in the private sector. Negotiated budgets seem to be
operational in the public sector. Such approach uses the precise knowledge of low level
managers with the broader perspectives of senior management level (Irene, 2010).
Consequently, all the agencies within the ministry are needed to make some
presentation of the estimates undertaken by the company in the process development of the
budget. In the past many years, management accountants have been framing budget based on
the benchmarks taken by the company in the previous years plus any type of additional
information associated with it. Now days there are some management accountants that are
referring the National Budget as the political benchmark instrument. In case budget is
considered as factor of motivation then, it not just only involves the manager of the company,
but it also involves workers of ministry level (Pamela & Frank, 2010).

EXAMINATION OF BEHAVIORAL ASPECT IN BUDGETING 9
Beyond Budgeting
Beyond Budgeting is specific idea that shows the abolition of the traditional process
of preparing budget as the trigger for enhancing the management control within the company
by fundamental re- examination of they can be managed more effectively (Olesen, 2014);
(Sahota, Bogsnes, Nyfjord, Hesselberg, & Drugovic, 2014)
Traditional budgets used to hold the companies back, restrict the creativity of staff
and used to prevent them from responding towards the customers. The process of beyond
budgeting argues that the company today needs to be flexible in nature and even responsive
in dealing with the unpredictable changes. (Sandalgaard & Bukh, 2014) has claimed that this
needs effective management of strategies and replacement of the control designing of
companies that are having a dispersion of authority. As per the study of (Shutibhinyo, 2013) ;
(Nagel & Oliveira, 2014) the value of budgeting has diminished completely and it also
continues to add, the least amount of value than it is expected, notwithstanding with the
resources that are being ploughed in the activities. The concept of beyond budgeting is
focused on the new steering mechanism for replacing the budgets wherein organizational and
behavioral changes are required for supporting the new mechanism (Palladium, 2015).
Findings
Budgeting has been considered as one of the critical processes of management
accounting. While preparing budget, factors like budget establishments, performance
reporting and degree of uncertainty are to be considered (Harold, 2010). For the purpose of
managing the factors in successful manner, high level sensitivity amongst the management
accountants are required (Harold, 2010). Budgets are becoming more inaccurate as
worldwide events are becoming dynamic. Many times, companies tend to expect the results

EXAMINATION OF BEHAVIORAL ASPECT IN BUDGETING 10
from the budgetary controls and fails in recognizing that the main issue of budgeting is
behavioral changes (Surianti & Dalimunthe, 2015).
Conclusion
The resrecah question of our study was focused on Examination of Behavioral Aspect
in Budgeting and its was well achieved through the analysis. It was determined that
budgeting process is incomplete without behavioural interference of employees. It is required
that the management accountants should recognize varied techniques of accounting and their
relationship with human behavior. The behavioral aspect of the budget preparation is quite
significant and the management accountants are having the responsibility of minimizing the
behavioral issues with the use of control management. Management accountants are required
to work hard with the behavioral scientist for the purpose of gaining the importance of role
played by human behavior (Harold, 2010; Pamela & Frank, 2010).
Recommendation
Budget is being considered as a mechanism of steering for the purpose of replacing
the traditional management process of accounting. The concept of beyond budgeting shows a
shift in the financial measure performance towards human behavior. So, it is required to be
accredited as new performance and evaluation technique for the management in the current
time (Manan, 2011; Harold, 2010). In future, studies should focus on private sector also. A
comaprtive study in between public and private sector budget will offer more light on the
behavioral aspect in budgeting in both private and public sector.
References

EXAMINATION OF BEHAVIORAL ASPECT IN BUDGETING 11
Arnold, M. C., & Gillenkirch, R. M. (2015). Using negotiated budgets for planning and
performance evaluation: An experimental study. Accounting, Organizations and
Society, 43, 1-16.
Bakar, N. R., Amiruddin, R., & Auzair, S. M. (2014). Impact of Organisational Factors on
Budgetary Slack. E-proceedings of the Conference on Management and Muamalah.
Harold, B. (2010). An Introduction to Accounting and Managerial Finance: A merger of
equals. World Scientific Publishing Co. Pte. Ltd.
Irene, R. S. (2010). The Politics of Public Budgeting: Getting and spending, Borrowing and
Balancing. CQ Press.
Irene, R. S. (2010). The Politics of Public Budgeting: Getting and spending, Borrowing and
Balancing, 6th Edition. CQ Press.
Jaakson, K., & Kallaste, E. (2014). Who uses employee financial participation in an adverse
environment? The case of Estonia. Economic and Industrial Democracy, 37(3), 449-
467.
Klemstine, C. F., & Maher, M. W. (2014). Management Accounting Research (RLE
Accounting): A Review and Annotated Bibliography. Routledge.
Manan, S. (2011). Understanding Budget Process. CPDI.
Nagel, L. L., & Oliveira, J. P. (2014). Loose coupling in a beyond budgeting implementation:
a case study. occ.
Ndlovu, N. (2015). Understanding the budget cycle: Process, actors, and room for influence.
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Noor, M., Haryanti, I., & Othman, R. (2012). Budgetary participation: How it affects
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Olesen, A. (2014). Beyond Budgeting. Agilia Conference - BBRT.
Palladium. (2015). Is the budgeting process still fit for purpose? Palladium.

EXAMINATION OF BEHAVIORAL ASPECT IN BUDGETING 12
Pamela, D. P., & Frank, F. J. (2010). The Basics of Finance: An Introduction to Financial
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of Accounting & Organizational Change, 10(3), 409-423.
Shutibhinyo, W. (2013). Balanced scorecard attributes: key determinant and perceived
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