Disagreements over the Value of Budgets
Response to the following problem:
Tueller Enterprises is a large manufacturer of airplane parts for commercial and military aircraft. In addition to making parts, it also serves as a distributor for other, smaller manufacturers. Traditionally, the company has spent large amounts of time preparing operations budgets, only to find that they are rarely useful and often outdated. Some managers have even argued that because they are evaluated on the basis of how well they meet the budget, they have been unable to react to changing markets and take advantage of new opportunities that have become available. The managers argue that the entire budgeting process is too constraining and should be scrapped. The new controller agrees that the traditional budgeting process has been flawed but argues that with the availability of new computer technology and up-to-date performance information, budgets can now be revised more frequently and will be much more useful than in the past. The company is trying to decide what to do. Should it scrap the entire budgeting process? Or, should it work to make the budgeting process more relevant and useful?