Luke Jones 129010146 Dissertation -2

Luke Jones

Student Number: 129010146

Module Number: 3BM160

Dissertation

Faculty of Business

Monday 11th April

Word Count: 8’316

“How does strategic budgeting affect the behaviours and performance of managers within a business, focusing on the David

Lloyd Leisure York club?”

Luke Jones 129010146

Contents:

1. 1.0 Introduction 1.1 Research question

2. 2.0 Literature Review2.1 Budgets2.2 Function of Budgets 2.3 Managers Behaviours and Performance2.4 Hopwood’s Management Styles2.5 Theories behind Budgeting and different Management Styles 2.6 Alternative Budgeting Technique

3. 3.0 Methodology3.1 Research3.2 Purpose3.3 Research Methods3.4 Sample Selection 3.5 Gantt Chart3.6 Ethics Approval including reliability and validity

4. 4.0 Results and Findings5. 5.0 Discussion6. 6.0 Conclusion7. 7.0 Recommendations 8. 8.0 Reference List9. 9.0 Appendices

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1.0 Introduction

This dissertation paper looks into how budgets and the budgeting system have affected

manager’s behaviours and objectives regarding how to manage a business. The main topic

of this research and this paper is evolved around the organisation David Lloyd Leisure,

focusing in more detail on the York club. The senior managers of this organisation were

interviewed in their departments on a variety of different questions enabling to understand

how they perform and behave as a manger. Types of issues that have been looked into

include how different aspects of a business affect their leadership and management skills,

the use of targets and how they manage their team to achieve them and the use of strategic

budgeting and the budgeting system. Hope and Fraser (2003) explain how the budgeting

system has developed and advanced which focuses on the Performance Management

Process; this is evaluated across the financial year comparing different factors including

planning and setting expectations, monitoring performance and continually motivating the

team.

This paper demonstrates an understanding and researchers into the topic of budgeting and

critically analyses how performance and behaviours affects the decisions of managers. Drury

(2012) explains why budgets are so important within an organisation and how they help to

run an effective business. Most managers are constantly thriving to achieve and always

desiring for a successful business; this is done by effective decision making and detailed

action plans. With David Lloyd, I looked into their mission statement to see how this can be

related to the budgeting system and relate the aspects of the organisation. David Lloyd’s

vision is to be ‘Europe’s leading health, sport and leisure business’.

1.1 Research Question:

How does strategic budgeting affect the behaviours and performance of managers within a

business, focusing on the David Lloyd Leisure York club?

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This reports main objectives include:

1. To explore and evaluate the statistics of the budgets set for the David Lloyd Leisure

York Club, comparing the change in the financial position.

2. To assess the appropriate literature and theories regarding the budgeting process

and the relation to management within running a business.

3. To research and critically review on how the budget system can affect the

behaviours and performance of the management team at David Lloyd Leisure York

Club, comparing the different departments including Sales and Membership, Sports

participation and operations of the club.

4. To compare the affects of managers reaching and meeting targets by applying the

use of brand standards and team effectiveness to reach these goals.

The paper looks into David Lloyd’s background and into detail studying the organisation’s

annual reports relating specific literature on how the budgeting system might have affected

the results. Fridson and Alvarez (2002) explain the use of financial statements and how the

use of financial data can help predict future budgets and predictions of a business. This

paper expands of David Lloyd’s predictions and how the managers of the business believe

they can achieve their budgets. The idea of this project is to evaluate how different

managers within the company react and manage their department when their

budgets/targets are set; relating this to the different qualities and factors that are used

within a business including communication, motivation and competition.

The next part of this dissertation project will look into the literature around budgeting and

how managers deal with them. It will look into the different management styles and

theories behind the behaviours and performance of managers and how they can run a

business.

2.0 Literature Review

2.1 Budgets

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Budgets can be defined as a strategic plan and help determine the future of a business (Atrill

and McLaney, 2007). Atrill and McLaney (2007) go onto explain how budgets are for the

short-term process and have been broken down from the strategic plan – they are always

expressed in financial terms. Kemp (2003) goes onto explain why it is important for a

business to set budgets and how planning can help the business succeed in the long term;

when a business creates a plan they can search for mistakes and resolve the matter at the

planning stage rather than when the business is in action.

2.2 Functions of Budgets

When looking at the function of budgets, Emmanuel and Otley (2004) help explain the

purposes and uses of budgeting through management. Drury (2012) shows a similar

approach in the factors of management budgeting making the use of all the same purposes

as Emmanuel and Otley (2004) apart from authorization. This shows that many different

theorists explain budgeting in a similar approach and help explain the differences in the

purposes of budgets from a manager’s point of view. These functions include

Planning

Coordination

Communication

Motivation

Control

Performance Evaluation

Authorization is used as a use of assurance, looking into the managers giving approval of the

budgets set; will the money be used appropriately and efficiently? Will the business

overspend these budgets? Etc. As society evolves, its up to the senior management team to

approve reachable and achievable targets taking into consideration the internal and

external factors; authority is needed so finances are kept organised and structured for the

work environment and society (Emmanuel and Otley. 2004). Cadle, Paul and Turner (2010)

help explain the use of the PESTLE analysis and how it helps identify key external factors

that can affect a business. The PESTLE analysis focuses on 6 factors that are outside the

control of a business; these include Political, Economic, Social, Technological, Legal and

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Environmental. The PESTLE analysis provides businesses with an outline of issues that could

potentially effect the organisation; it helps evaluate and analyse these issues and makes the

business more knowledgeable in the current work environment and how they can succeed.

Atrill and McLaney (2007) state the difference between budgeting and forecasting,

explaining how budgeting is a plan on what a business is going to achieve or take action on,

whereas forecasting is a prediction of what the outcomes might be and are only

expectations of the business. When it comes to a business, planning is the most crucial part

of budgets; this can determine the profit and loss of the organisation and help see the steps

of success. Planning can be long and short term; budgets are related to the short-term

process and are usually annual related. Planning can help determine the results for the next

annual years budgets and see how they can be improved, whether the targets are too high

or too low to be achieved (Shim and Siegel, 2005).

The key to successful budgeting involves the coordination of all departments within a

business, with the occurrence of excellent communication. Hofstede (2012) states how the

profit of a business is affected by the use of more enhanced coordination from the different

departments within a company and the decisions the managers can make. Different

departments will look at what works best for them, so the right coordination and budget

control could help impact the finance of a business. With this, communication is vital and is

highly expected across departments and management to achieve successful budgeting.

Drury (2012) explains how each manager in an organisation should be clear in their set tasks

and actions in order to reach the annual budgets; higher management will communicate to

lower level management regarding the expectations and how the managers can coordinate

the different plans between each other.

2.3 Manager’s behaviors and Performance

Human behaviours can vary in different ways within a business; this can be dependent on

how budgets are set and the targets reached (Warren, Reeve, and Duchac, 2012). Warren,

Reeve and Duchac (2012) help to explain the importance of budgeting compared to

management and how the levels of budgeting can affect the performance of staff within an

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organisation. Behaviours can alter if the budgets are either set too high, too low or are in

conflict with the outcome.

Behaviours and Performance of managers can be easily affected by budgets; managers can

become more conscious and alert depending on what level they are at (Hierarchy). Banks

and Gilberti (2008) talk about how performance can be measured within the business and

how now many higher-level management teams support the lower levels managers into

accessing financial information, so they have a better understanding of the budgeting

process. The use of budgets should create a positive attitude throughout the business; each

feature should be more of a game setting and task related rather than looking into financial

data more in-depth (Raghunandan, Ramgulam and Raghunandan-Mohammed, 2012).

2.4 Hopwood’s Management Styles

Raghunandan, Ramgulam and Raghunandan-Mohammed (2012) go onto expand on the use

of management styles related to budgeting and the job related behaviours. Dugdale and

Lyne (2010) explain how a theorist named Anthony Hopwood (1944-2010) devised 3 main

management styles that related to budgetary information and evaluated the performance

and the business aspects. These included:

Budget Constrained Style

Profit Conscious Style

Non-Accounting Style

Dugdale and Lyne (2010) explain more on Hopwood’s theory and showed how each style

compared different managerial approaches and affected the way on how an organisation is

ran. The research carried out was aimed to show the managers response when dealt with

budgets and meeting targets, looking into how they are controlled and evaluated on their

performance.

The budget-constrained style looks at how managers are evaluated on their budget

achievement; the fact that managers are criticized if they do not reach their set budget.

Atrill and Mclaney (2007) help identify the management style by stating that this approach

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means employees must meet their set budgets. Lower level managers have to reach their

budget in a short term period; behaviours of this aspect can result in managers making short

term decisions, pressure throughout the job and no long term gain (Dugdale and Lyne,

2010). In relation to an employee not reaching the set budget, if the manager were to use

the constrained approach, there would be a lower job satisfaction from the employees, with

the relationships between managers and employees poor. This management style focuses

the attention to reaching the budgets, forgetting other important aspects that, in the long

term, could expand the goals and targets, and even relationships within the working

environment (Atrill and Mclaney, 2007).

The profit conscious style of management looks at improving the business in the long term

and the affects of, rather than achieving the budgets, but reducing the costs associated

within the business. This method allows managers to achieve long-term profit and

effectiveness of the organisation; the approach is more flexible in management and usage of

the operations of the business (Dugdale and Lyne, 2010). Atrill and Mclaney (2007) explain

when management respond from budgets and financial information stating that the

managers look into a wider and clearer scale, taking other factors into perspective; these

factors that have affected the budgets may not have been present when planning and

creating them to start with. So with the profit conscious management style, managers are

able to justify and think more about the situation before deciding the outcome of the

employees. There is said to be less stress with this style of management and can create

more working relationships with employees and managers.

The non-accounting style looks at the non-financial aspects within the management. The

idea that the actual figures of the budgets pay no importance when it comes to achieving

them; the use of factors involved around the non finance part to management including

quality of goods and services and customer satisfaction (Drury, 2009). Atrill and Mclaney

(2007) identify this management style where budgets are of no importance towards the

business; the fact that if managers concentrated and focused on the performance of the

organisation, then the business will run effectively and efficiently. When related to failure in

reaching the budget, this management style isn’t concerned and is classed as being

unimportant.

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Dugdale and Lyne (2010) explain Hopwood’s study well in supporting the profit conscious

style as the most efficient and effective to achieving the budgets and a more successful

business. Failure to meet budgets can have an impact on the working relations of the

management team, as well as a cost effective downfall. Managers will have to deal with this

in what they believe is the most effective way and how they see the outline; the senior

management team need to justify why they believe their junior managers will reach the set

budgets and the performance they are going to give (Atrill and Mclaney, 2007).

2.5 Theories behind Budgeting and Different Management Styles

Budgeting has many impacts within an organisation; there are different concepts to examine

how managers behave around the numerical figures. Different theories of management

styles can affect how managers use and see the budgets of a business. Wildaysky (2009)

helps explains why traditional budgeting has been so popular in todays society and why

business are using this method of budgeting; the fact that traditional budgeting examines

the past and previous income statements to provide evidence to support planning the

budgets. A more theoretical approach into the budgeting system is needed in order to look

at the managerial behaviour around budgets, and the different theories behind

management styles and methods.

Northouse (2010) looks at the contingency theory, which revolves around organisational

theory, and how there is no best way to manage and control a business, explaining how

managers make decisions based on situation. Contingency Theory is described how different

leaders and managers are corresponded to different management styles and how different

contexts can affect the leadership (Northhouse, 2010). Yukl (2011) helps explain how

managers can be affected by the budgets relating to contingency theory and the adaptions it

can cause. Managers can control situational factors that can adapt and alter the financial

position of an organisation. The contingency approach to the finance of the business looks

at the internal and external factors that managers have to make decisions around. There are

set to be five elements that use the contingency theory and the variables that effect the

managements behaviours for finance and budgeting control including; the environment;

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technology; organisation size; structure; and strategy and national culture (Abbadi, 2013);

management’s behaviour on a situation can affect the business’s budgets.

Agency Theory is described as the relationship between a principle and an agent, comparing

the managerial approaches with each other and the decisions that can be made between

them (Douma and Schreuder, 2008). This approach looks at how the principle has control

over the agent, where the principle controls the agent, but the agent makes the executive

decisions for the organisation. The Agency theory has been looked at with differences and

diverges between the principle and the agent, where agent’s actions can affect the

principles interests and welfares. The idea is that principle’s help control the use of the

agent’s resources through budgeting; how much they spend and their costs for the business

(Hill and Jones, 1992). In order to create a smooth running of the organisation, the interests

of both the agent and the principle need to be on the same level; a difference can cause

conflict with decisions where profit and expenditures can not be used to their full potential.

Resource Dependence theory is based on external factors and how these can influence and

alter the behaviours of an organisation. Pfeffer and Salancik (2003) talk about how

organisations rely on each other with their resources; certain companies will need specific

resources that other companies provide. Basically, organisations look towards the external

environment for resources where they might be dependent towards another organisation

who holds the power to supply these resources. Hillman, Withers and Collins (2009) talk

about how managers within an organisation must make creative and empirical decisions

regarding the finance and budgets to provide the resources they need for their business.

2.6 Alternative Budgeting Technique

Hope and Fraser (2003) research into how organisations and society are using the same

business model that doesn’t really expand on their set aims and objectives. The use of the

“plan-make and sell” model around the traditional budgeting technique can be described as

predictable, where targets are created via the resources the companies have, and the

previous income provided. A further look into how an organisation can control its financial

figures and expand a strategy is a method called Beyond Budgeting. Beyond Budgeting is

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described how budgets can be examined and stretched into a further in-depth meaning;

organisations are able to use this method to focus more on performance management

within their strategy and manage more information with the current society and

environment (Hope and Fraser, 2003).

The Beyond Budgeting method has many advantages including higher managements

involvement within the company and the work environment. The idea is that managers are

set in a ‘comfort’ zone when it comes to finance and budgets when in the traditional

budgeting method; the beyond budgeting approach looks at a more ‘stretched’ zone where

managers within an organisation are more concerned and interacted with the current

targets, which indicates that they have more time to evaluate the set targets and whether

they are achievable or can be expanded due to the workforce (Bourmistrov and Kaarboe,

2013). With this in mind, Ostergren and Stensaker (2011) look into the beyond budgeting

method by stating that it is a more adaptable and active way to research how to create a

successful organisation. The process of managers being more involved and engaged with the

goals and budgets can help generate a strategy, which works well in the current human

society and work environment. This method can provide organisations to seek more into

why budgets are being met or why managers aren’t performing to their full affect.

The next section of this paper involves the methodology of the research and how the

research was conducted. This will involve the research question, the samples of data and

how they were collected.

3.0 Methodology

3.1 Research

Glatthorn and Joyner (2005) help to structure the methodology and look at the different

sectors involved that will help the process. These include data analysis, the different types

and perspectives and then the different methods involved. They go into explaining the use

of qualitative and quantitative perspectives and the use of the participants and location of

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research study. In order to complete a research project, there needs to be some knowledge

and awareness of what research actually is and how to sustain this knowledge (Kumar,

2008). Kumar (2008) also goes into a few definitions that describes and explains research;

this can be generalised as collecting, analysing and explaining data collected to result in

finding theories and exploring more around the topic examined. In order to collect the

research, here were the methods to accompany the dissertation project:

1. Type of research and specific subtype

2. Context and access

3. Participants & how selected

4. Instrumentation

5. Data Collection

6. Data analysis

Research is branched into many different aspects; one method of looking into this theory is

the research onion. Saunders, Lewis and Thornhill (2009) go into detail and explain more

around the model and the layers around what research entitles. There are different layers of

research focusing on the types of research, the methods to use and the types of paradigms.

The University of Derby expands on this model explaining how there are 3 types of

philosophies, which divide the philosophical strand; these include epistemology, ontology

and axiology. Epistemology is looked at as the acceptance and recognition of knowledge in

theoretical practice; this can then expand into the realism philosophy (Crotty, 1998). The

research onion conducts the methodology of research dividing into different layers and

sectors (from outwards – in):

1. Philosophies

2. Approaches

3. Strategies

4. Choices

5. Time Hr

3.2 Purpose

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The Purpose of this research was to determine whether budgets have an impact on the way

managers run a business. With this, this research has examined some of the different

departments within an organisation and compared how each manager differs in their

performance when assigned with their set budgets for the year.

3.3 Research methods

This research has looked into the realism approach through philosophies and shows the use

of both qualitative and quantitative data. Flowers (2009) explain how critical realism takes

the approach of researching on how things behave and the outcomes of this. This research

has looked at the use of budgets using figures of each department in the business, analysing

quantitative data while also interviewing each manager of how these figures affect them

through feelings and emotions.

The method of this research has consisted of undertaking interviews within the David Lloyd

Leisure York club, as well as collecting some of the set budgets for the departments over the

last financial years. These will be compared with the results of the interviews. There will be

6 managers being interviewed for this research; these include:

General Manager

Operations Manager

Members Relation Manager

Sports Manager

Sales Manager

Head/Lead Coach

Interviews are used for great observation and to get the in-depth information of feelings

and attitudes; this is the main reason why interviews have been operated in this research.

The use of an interview is to dive deeper into the thoughts and feelings of individuals and

what they believe in. In appendix 1, you can see the full set of interview questions that have

been used in this study. The negative approach from using interviews were mainly time

consuming; they took up majority of the time to record and analyse the data collected.

Gillham (2000) explains the use of time consumption when using interviews to research a

topic; the use of transcription and analysis can take a lot longer than most other data

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collection tools. There is also the use that the subjects taking part in the research may be

untruthful in their statements and answers aiming to be more biased in what the research

was aiming to find out.

3.4 Sample Selection

King and Horrocks (2010) talk about the impacts of interviews and how they should be used

when conducting research including where to take the interview and the recordings. The

subjects have ethically approved the information that has been recorded through the

interviews; the information provided will be private and confidential for the subject’s

confidentiality.

The results from the interviews have been demonstrated by both quantitative and

qualitative approaches. As seen in Appendix 1, there is a large use of scales used to identify

quantitative findings; the results have been analysed through bar graphs and charts to help

expand and see if a regular patterns occurs. For the qualitative questions, the data has been

analysed through the use of gathering themes and specific patterns that occur through

audio and notes. The use of thematic analysis occurs; this is a qualitative data analysis

approach which will help identify the use of reoccurring themes throughout the research

and help solve the research question (Braun and Clarke, 2006).

The questions used in the interviews were specific towards to the literature in management

styles and how the managers believed their budgets affected their work performance and

whether changes were necessary. The idea was to create questions that would help explain

how the manages behaved through different factors associated with financial information

including communication throughout the organisation, motivation towards their

department and their own work performance as a senior manager.

3.5 Gantt Chart

A Gantt chart has been used to show the process of the research explaining timings and

deadlines associated with the methodology. A Gantt chart is mainly used for helping time

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schedules and procedures along a set time period (Lester, 2007). The Gantt chart for this

research is located in appendix 2.

3.6 Ethics Approval including reliability and validity

When undertaking a research project, ethics approval needs to take place. Subjects that are

being examined and analysed will have to be protected depending on the type of research

being commenced (Easterby-Smith, Thorpe and Jackson, 2011). Due to the researcher

having total control of the results taken in the research, it is their responsibility for that

information to be kept private and secure.

The interview questions have been reliable throughout the research conducting beneficial

and productive information. The data collected has been analysed through interpretation;

the questions that have been be asked have been asked to everyone taking part in the study

in order for the results to be reliable. The right questions have been asked to get the right

information and results needed for the research question; validity of the questions is

required. In order to for validity to occur within the research, the questions in the interview

have needed to input towards how the budgeting process affects the performance and

behaviours of the managers.

The next stage of this research involves the results and findings of the data collected. The

information collected from the interviews and how this is analysed.

4.0 Results and Findings

Throughout this part of the study, each question will be analysed either qualitatively,

quantitatively or both. The Subjects have been placed from A-F noting everyone’s position

within the company so that we can see whether they are department and subjected to the

questions.

Subject A – General Manager

Subject B – Operations Manager

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Subject C – Members Relations Manager

Subject D – Sports Manager

Subject E – Sales Manager

Subject F – Head/Lead Coach

This research is based upon 6 managers at David Lloyd Leisure York, where they were

expected to answer 14 questions related to the management styles they have and budgets

affect their managerial skills and their behaviour towards the organisation. Each question

has been analysed according to the subject’s responses and how they relate to one another;

each question has a different aspect towards management behaviours and performance

including communication, work performance and knowledge around budgets perspective.

As mentioned in the methodology, interviews can examine patterns and themes between

subjects to help create a broader understanding and more in depth knowledge around a

certain topic; in this case, how budgets affect management.

Question 1

Each Subject stated that they really enjoyed working at David Lloyd and how they’ve come

to their position. This question was an icebreaker in a sense that they should like working at

David Lloyd if they are in a senior management position working with a great team to build

on the business.

Question 2

There was a variety of different words associated with finance and budgets where each

subject had to express a feeling or an emotion related to these words. The results are listed

in the Appendix under table 1. As seen, the results show that the subjects vary with

similarities and differences in feelings regarding finance and budget related emotions.

However, for the word ‘investment’, we a similarity in all the subjects feeling ‘excited’

where there is support to show the management team are all on the same level.

Question 3

The results are both quantitative and qualitative with the use of scale on how confident the

subjects were in financial information and numerical data. The results are listed in the

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Appendix under Figure 1. The results show that majority of the subjects are confident with

their financial figures and data with evidence in transcript regarding learning and

improvement and learning. Question b shows a regular theme in that the subjects do feel

they are under pressure by their management, identifying a traditional budgeting method;

only subject C stated that they were not under pressure by higher management regarding

budgets.

Question 4

Again, both quantitative and qualitative looking at how work performance is affected. The

use of a scale was used again and the results can be shown in the appendices under Figure

2. The chart shows how many subjects chose which scale they believed budgets affected

their work performance; with all subjects being at the top end of the scale, there is another

regular pattern explaining how budgets can influence work performance.

Question 5

Using thematic analysis, regular ideas and themes were mentioned throughout the

question; the use of communication towards a business and how budgets are

communicated throughout the management team. We can results of subjects stating ‘vital’

and ‘impacts other departments’; the theme of importance occurs and how much

communication impacts the business. The second part of the question involved the subject’s

express their emotions of communication towards different members in the organisation

including head office. Quote from subject B states, “I don’t think they always communicate

very well because they don’t have that much front line focus”; they being employees from

head office. Subject D and E state that head office were late in delivering their budgets to

the management team, where subject D quotes “I would have liked to have been a little bit

more prepared – to work out a bit of a plan and a strategy”.

Question 6

This question resolves around how relationships build within the business and how

managers react to different departments. The results show us that the managers within this

club have a great relationship and bond with each other, showing a difference in hierarchy

with managers. Subject F shows a different approach in competition between each sports

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department quoting “there’s a little bit of competition there between departments – where

if F&B start smashing it, then that’s going to motivate me”. Regular themes include

similarity and connections, as well as competitiveness towards reaching goals and setting

budgets.

Question 7

The use of measuring motivation throughout the managers departments and themselves; a

quantitative and qualitative approach was used. The results for 7 a, are located in the

appendices under Figure 3. Throughout this question, the subject’s responses included a

few different themes involving the importance of motivation and how it can be applied in all

set budgets; subject A quotes “it can be both – if my budgets tough then, I have to really dig

deep and think about how I’m gonna convince everybody else – if the numbers low then the

opportunity is massive”. Subject D talks about self-motivation and personal pride in always

wanting to achieve to reach the end goals and targets.

Question 8

This question involved a variety of different qualitative approaches looking into work

performance from setting budgets and the behaviours of a manager. The themes include

work overload, acceding the budgets, positive feeling and time management. With 4

question each relating a different part of budget knowledge; there are a lot of different

aspects involved how they affect managerial experience. Subject D explains how budgets

can be used as both long and short term, explaining the use of how short term goals can

affect the long-term effectiveness; a long-term approach is broadened across each of the

other subjects. Subject C provides emotions of a work life balance to help support the right

mindset when it comes to managing budgets and targets; the use of helping and supporting

team members is important and you can’t be negative as this can spread into the rest of the

business. There is a mixture of themes and ideas across this subject with different managers

explain difference in opinion due to the department they work in.

Question 9

This question revolves around the use of strategic planning and how important it can be

when it comes down to budgets; the idea was how the subjects would plan and strategize to

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reach their budgets. Themes involved restructure, training and development, and teamwork

within departments and the business. Subject C quotes “I think we need to look at a

restructure of the departments in my opinion, I think we need to look at the member

experience overall and where the perception come from”. The results from the subjects

shows an understanding of the organisation and how to achieve customer service with

subject C looking at how a restructure of departments could help provide the most out of

the budgets.

Question 10

Within this research, there needed to be an involvement and understanding question,

relating to past experiences and scenarios. This question provided the use of a situation

where there was a 15% increase in the annual budgets. Subject B quoted “I want to see the

work that’s gone into producing that budget, so if you’ve come up with 15% why is that?”

The themes related are decision making and the support provided, along with difficulty level

with some subjects stating it would be easy and others saying it would be too hard. Subject

E quotes “I’d be quite annoyed, based on the fact that we over delivered last year and to

replicate that same over performance this year is probably a little bit unrealistic.” stating

their initial thought. Recruitment is an occurring theme as stated that if they are increasing

the budgets, they’re going to need more staff to deliver.

Question 11

Competition is a feeling of rivalry, which can impact how a manager behaves. This question

shows an understanding of the relationship between working in a sporting environment and

managing a members club. Subject A mentions how much a manager wants their job

quoting “Our aspirations are already set high because we think we should be the best.”

aiming to provided competition between other companies. There were 3 aims from this

question on how competition affects the budgets from the subjects own department, other

departments and then other businesses/companies. Subject E looks at competition between

their departments and states a “healthy” competition is necessary – “For my immediate

team, I do challenge them, I make sure that they know that they’re up against each other.”

Within the sports department, there is always going to be competition involved with each

line manager facing a different form of competition in order to reach their targets.

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Question 12

Both qualitative and quantitative analysis were used in this question; the use of the PESTLE

analysis provided the subjects with a scale of 1-10 of how they believed each component

affected the budgets of the business. A table of the results is shown in the appendices under

Table 2. For an average results, the use of a radar diagram is presented; this shows the

different levels of importance each subject thought was most important noting that

Economic is the highest, where technological is the lowest. Each subject related their own

department towards each of the external factors and the importance of each one and how it

affects their budgets.

Question 13

This question relates to the previous question stating which component subjects thought

would affect them most from achieving their budget. The results are shown in the

appendices under Table 3, showing that economic was the most common component that

the subjects thought would affect their budgets.

Question 14

The use of thematic analysis is used where the identity of themes and patterns occur. The

use of planning and preparation occur along with research and knowledge. Subject B quotes

“it’s just about making sure you understand … what and how a budgets created / what’s

involved in that.” stating that it could be labour hours or even the age of the employees and

how much they get paid, and the use of resources provided making sure they are well

equipped and not over spending. Subject F quotes more about the short term and long-term

plans and how managing short term can have a negative approach towards the budget “you

are much more likely to achieve that budget because you are gonna set in plan, and set into

plan / you know long term / solutions rather than short term sited solutions.” The subjects

form a different but positive approach to strategic planning when it comes down to their

budgets.

Subjects B and F’s transcriptions are located in the Appendices for reference.

20


The next chapter of this dissertation project will look into discuss the results established

from the questions and how the subject’s answers relate to managerial behaviours and their

work performance, and how they convey the different literature.

5.0 Discussion

Anthony Hopwood’s Management Styles

Understanding financial information in a business can be difficult and require different levels

of knowledge around the company (Fridson and Alvarez, 2002). The subjects were tested on

what feelings they had when interfaced with financial words and topics e.g. budgets.

Question 2 of the research manages to identify the subject’s emotions towards finance and

compare the difference in how they feel when having to deal with these associated words.

Table 1 from the appendices shows the results of what the subject’s responded to; they

have been colour coordinated to identify different patterns and feelings regarding the

answers. From the table, there is evidence to show that for the words “Investment” and

“Profit”, all the subjects were able to give a positive response. This shows team cohesion

within the management team as they are all at the same level regarding income of the

business and exceeding the targets. For the word “Budget”, there is a mix of emotions;

subject’s A and B are more positive around the idea and suggest that they are focused

around a budget guideline. Subject’s C and D show a more negative and challenging

approach towards the word “Budget” suggesting that their methods of managing the

business focus less on budgets but more on a steady approach and are feeling and people

orientated. When relating this to Anthony Hopwood’s performance evaluation on managing

the business around budgets, there is evidence to show that potentially subject’s A and B

are more towards the Budget constrained and Profit Conscious styles.

Atrill and Mclaney (2007) have looked into the facts regarding Anthony Hopwood’s

management styles of budgeting; the three different styles all include a different aspect

around budgeting and how that helps manage a business. Subject D has quoted “taking a

21


step back, realigning some of the departments, and maybe looking to push back if necessary

on things that look a little bit unachievable, and then put in a bit of a plan in place, month by

month for each department.” This response to question 8 b shows that the subject looks

more in the long-term aspect of budgeting, showing potential that they would need to cut

back on other areas and departments to achieve an overall success. This, relating to

Hopwood’s theory suggests that this subject is shown to have a Profit Conscious style of

managing, where they focus on the costs of the business and are more flexible when it

comes to achieving the budgets in the long run (Dugdale and Lyne, 2010). Since subject D is

our sports manager, the job entitles managing different sporting departments within the

club, where each department has their own budget’s set. This suggests that subject D needs

to think more about each budget set and where they can be making the highest income,

where there is potential and which departments aren’t achieving; this then proposes that

subject D is thinking strategically and preparing the plan the budgets in the long-term to get

the most effective for the business. Subject A continues this approach and strategizes how

they are not stressful when they don’t perform to the target; quoting “So whilst we haven’t

hit the income retail this month, it’s nothing compared to the fact that we saved so much

costs. So some of that has come from the work in the last 5 months that we’ve put into the

utilities.” This also suggests that the management looks into cutting the costs as well as

reaching the set budgets, expanding on a more efficient company. The theme of overseeing

the whole business and analysing the areas of development connect a strategic plan from

the business as a whole.

Subject E talks about strategies and procedures put into place to reach targets explaining

how this is done “We have a sales activity planner, which is broken down by day and targets

the number of sales you want on that day and the number of leads that you want on that

day, and then the activity that’s going to drive the lead in and sales for the next 3 days, and

that’s broken down by day, and then by sales consultant.” This carries on to a structured

procedure for the staff where “everyone knows their expectations, but also what they need

to know in order to achieve target.” This suggests that the subject bases their performance

around a working target, always striving to reach for that goal. Subject E is the sales

manager within the company; looking at this from a qualitative point of view, people who

work in sales are target driven and constantly need a number to work towards in order to

22


achieve success. This could represent a budget constrained style approach due to the fact

that the management is always constantly working on a budget and target (Drury, 2012).

Subject E will have come from a sales background and will have always had to work with

budgets each and every month; this can alter and adapt the managerial behaviours aiming

towards the budget constrained approach after working in the industry for over a long

period of time.

Planning and Communication

The idea around this research was to see how strategic budgeting affects the behaviours

and work performance of managers in a business. The results from the interviews show a

reoccurring pattern of planning and preparation of budgets, and the importance of knowing

the length of time needed to achieve this.

Subject C talks about communication and the importance of it within a work environment

quoting “Key, absolutely key. I f we don’t communicate, we don’t know, we don’t learn, we

can’t share knowledge. We won’t deliver if we don’t communicate.” Communication is vital

when it comes to budgets; depending on the budgeting method, the working management

is able to give their input towards the final budgeting say and can pass these on the higher

management who decide the budgets. Drury (2012) shows the importance of

communication and how if the right information isn’t passed on, then the business could

end up with higher, or lower, budget then what they should actually be receiving. This

proposes that, within the business, communication varies throughout the company with the

emphasis of “key” explaining that it sometimes doesn’t happen, which can lead to a

negative affect on the business. Strategic planning of the budgets needs to be

communicated to all departments, and managers, in order to achieve successful

communication to the members of the club.

Competition around Management and the Sports and Leisure work environment

Competition plays an important part within a business; the idea being behind managers

want to succeed and be better then others. Subject F shows a competitive edge between

23


other departments within the organisation stating their relationships and the strategy used

to build on their budgets “everyone’s a little bit competitive / so yeah in departments like if I

saw another department flourishing where as I’m, you know, not doing too well then / I

would want to work harder and pick that up because, you know, I’m a quite competitive

individual.” This suggests the use how competition in sports can adapt to the business

environment; subject F is the Lead/Head coach in the gym, therefore, automatically, should

be really competitive. In this situation, we can see the use of the Contingency theory and

how the subject managed to adapt and change their management style when the

department was exceeding (Northhouse, 2010). The decisions made in this situation could

alter the financial figures and the set budgets for the end of year figure, explaining how, the

regular theme competition, is always constantly changing the way managers manage their

budgets.

Subject A talks about competition on a scale of reaching a target and the aims that they can

reach to as a team quoting “well because we’re more competitive, I’m naturally

competitive. So I always aim for a goal that I think we can achieve, but also a goal that will

stretch us as a team.” This suggests using competition to bring in teamwork in order to

achieve the budgets. When subject A suggests a “stretch”, this can relate to the beyond

budgeting terminology. The idea here explains how the subject uses more of a stretched

zone; this suggests that the manager builds on the beyond budgeting method where there is

more interaction and connection with line managers and updated budgets. Rather than

using the comfort zone, the subject expresses the use of reaching out to their team in order

to achieve and exceed in reaching the budgets – a stretched zone (Bourmistrov and

Kaarboe, 2013). Competition can help strategic planning with the budgets in this work

environment with the evidence from the subjects that they are “naturally” competitive. The

idea is that, in a sports environment, people are usually competitive, so applying this to a

business point of view, reaching the goals and targets is the game, and competition

between departments and business will encourage managers to reach those aims.

Managers behaviours can evolve around a beyond budgeting method with the use of using

competition to provide performance measurement and evaluations on how the managers

can progress (Hope and Fraser, 2003).

24


External Factors

The use of the PESTLE analysis was used in the interviews to get information regarding

whether the subjects thoughts these factors could influence their budgets. The results are

presented in a radar chart to help see the different levels of importance, on an average; the

subject’s though would have an impact on the effects of their budgets. The results show

that the Economic factor is the most popular from the subjects, coming to an average at 8.3

as seen from Table 2, and Figure 4. This suggests that finance is a major factor in the

subjects managing work performance; the use of budgets and the economy have a major

relation, which management needs to rely on. Looking at Table 3, the results show, which

factors the subject’s mostly, affected them from reaching their budgets. These results

support the radar chart and the subject’s initial choices of the PESTLE analysis. Subjects B

and C are the only 2, which didn’t choose economic as the component that mostly, affected

their budget.

Subject C stated that the environment was the factor that would impact the most of their

budgets stating, “So my budget is attrition, so it’s about retaining people.” The subject also

added “The membership, the experience within the club and outside of it is important for

reputation. We need to keep this reputation up to high standards by keeping out

environment at the highest level.” The resource development theory is based on external

factors and how these can influence the behaviours of managers. Hillman, Withers and

Collins (2009) show this approach where managers must make financial decisions regarding

the external factors and how these can affect the budgets; subject B talks about the

resources and utilities quoting “We have to make sure that all of our waste is got rid of

properly. We have to make sure we don’t use too much energy, that all staff members

understand that.” This shows that the operations side to the business has a budget of

cutting down costs from the resources of utilities. In relation to the resource development

theory, the budget can be influenced by any external factor including fixing the heating,

cleaning of the pool and gas monitoring. The decisions made by the management team will

affect the budget of department with the resources that are used. Strategic planning of the

budgets can help manager’s behaviours around the budgets on what resources are needed

25


and can be used on a monthly basis without overspending; this will reduce the risk of

situations where external factors can shift the balance of the budget spending.

6.0 Conclusion

6.1 Research Question

The research question - How does strategic budgeting affect the behaviours and

performance of managers within a business, focusing on the David Lloyd Leisure York club?

Strategic budgeting can influence managers behaviours on the planning and organisation of

the budgets. The idea of long and short term planning is vital within the business and how

each subject speaks about that in one form or another. The use of Anthony Hopwood’s

management styles from budgeting is extremely valuable when it comes down to

performance evaluation; the results have shown that managers respond positively towards

the budgets and use them as guidelines when organising and manage the business.

Different subjects stated around the fact how they plan and prepare themselves with the

budgets in order to achieve their job entitlement. Strategic Budgeting shows the

performance of managers and how they respond to the financial figures, whether it is a

positive or negative approach. The idea around this research was to see how managers

responded to the set budgets and whether a more strategic approach should be used;

evaluating the certain aspects of a business including motivation, communication and

strategic planning.

The results show that strategic budgeting is important to achieve a successful business

stating different managing styles react differently towards different departments. Does

strategic budgeting affect the managers behaviours and performance? Yes. There are more

aspects within this business which can alter how they achieve their budgets; the idea

around planning and preparing these budgets shows that, in time, success comes from the

how the managers perform to their team and building these relations improves the success

26


of the budgets. Different qualities and skills associated can impact the budgeting process

and affect how each employee can act to achieve their budgets.

7.0 Recommendations

This research has shown a variety of different aspects that could potential be explored. The

idea around competition in a sports, working environment is essential; throughout the

leisure industry, many different employees seek to perform to the best of their ability,

relating to a sporting challenge. Managers within this industry should have a competitive

edge and are, more than likely, to participate in sporting activities. The research into how

this affects success could lead to achieve more interactions with other business industries.

Budgets can be crucial in certain aspects of a business; different business can react

differently to budgets and targets. The potential thought of identifying the different

departments and subjects could be interesting to see whether budgets need to occur, or can

a business survive without them?

8.0 Reference List:

1. Abbadi, S. (2013) Contingencies Influencing the Budgeting Practices in the Jordanian Financial Sector. World Applied Sciences Journal 22 (7) pp. 991-1000.

2. Atrill, P., and McLaney, E. (2007) Management Accounting for Decision makers. Pearson Education Limited, Edinburgh Gate, Harlow.

3. Banks, A., and Gilberti, J. (2008) Budgeting. North Ryde, McGraw-Hill Australia.

4. Bourmistrov, A, and Kaarboe, K. (2013) ‘From comfort to stretch zones: A field study of two multinational companies applying “beyond budgeting” ideas’, Management Accounting Research, 24 (3) pp. 196-21.

5. Braun, V., and Clarke, V. (2006) Using Thematic Analysis is Psychology. 6. Qualitative Research in Psychology, 3 (2). pp. 77-101. Routledge.

7. Cadle, J., Paul, D. and Turner, P. (2010) Business Analysis Techniques. 72 Essential Tools for Success. BCS the Charted institute for IT.

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8. Crotty, M. (1998) The Foundations of Social Research: Meaning and Perspective in the research process. SAGE Publications,

9. Douma, S., and Schreuder, H. (2008) Economic Approaches to Organisations. Pearson Education Limited, Edinburgh Gate, Essex.

10. Drury, C. (2009) Management Accounting for Business. Cengage Learning EMEA, Cheriton House, Hampshire.

11. Drury, C. (2012) Management and cost Accounting. Cengage Learning EMEA, Cheriton House, Hampshire.

12. Dugdale, D., and Lyne, S. (2010) Budgeting Practice and Organisational Structure. CMIA Publishing, The Boulevard, Oxford.

13. Easterby-Smith, M., Thorpe, R., and Jackson, P. (2011) Management Research. SAGE Publications Ltd. London.

14. Emmanuel, O., and Otley, D. (2004) Accounting for Management Control. Thomson Learning, High Holborn House, London.

15. Flowers, J. (2009) Research Philosophies – Importance and Relevance. Research Leading Learning and Change, Cranfield School of Management.

16. Fridson, M., and Alvarez, F. (2002) Financial Statement Analysis: A Practitioners Guide. John Wiley & Son’s, New York.

17. Gillham, B. (2000) Research Interview. Continuum, London.

18. Glatthorn, A., and Joyner, R. (2005) Writing the winning thesis or dissertation: A step-by-step guide. Corwin Press, Thousand Oaks, California.

19. Hill, C., and Jones, T. (1992) Stakeholder-Agency Theory. Journal of Management Studies. 29 (2) pp. 131-154.

20. Hillman, A., Withers, M., and Collins, B. (2009) Resource Dependence Theory: A review. Journal of Management. 35 (6) pp. 1404-1427.

21. Hofstede, G. (2012) The Game of Budget control. Routledge, London.

22. Hope, J., and Faser, R. (2003) Beyond Budgeting: How managers can break free from the annual performance trap. Harvard business School Publishing, Boston.

23. Kemp, S. (2003) Budgeting for Managers. McGraw Hill Professional, New York City.

24. King, N., and Horrocks, C. (2010) Interviews in Qualitative Research. Sage Publications, Oliver’s Yard, London.

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25. Kumar, R. (2008) Research Methodology. APH Publishing Corporation, New Delhi.

26. Lester, A. (2007) Project Management, Planning and Control. Butterworth-Heinemann, Linacre House, Oxford.

27. Northhouse, P. (2010) Leadership: Theory and Practice. Sage Publications, Thousand Oaks, California.

28. Ostergren, K. & Stensaker, I. (2011) ‘Management Control without Budgets: A Field Study of ‘Beyond Budgeting’ in Practice’, European Accounting Review, 20 (1) pp 149-181.

29. Pfeffer, J., and Salancik, G. (2003) The External Control of Organisations: A resource dependence perspective. Stanford University Press, Stanford California.

30. Raghunandan, M., Ramgulam, N., and Raghunandan-Mohammed, K. (2012) Explaining the Behavioural Aspects of Budgeting with Particular-Emphasis on Public Sector/Service Budgets. International Journal of Business and Social Science, vol,3 No 14.

31. Saunders, M., Lewis, P., and Thornhill, A. (2009) Research Methods for Business: A skill binding approach. Wiley and Sons ltd. West Sussex.

32. Shim, J., and J, Siegel. (2005) Budgeting Basics and Beyond. John Wiley & Sons. Hoboken, New Jersey.

33. Warren, C., Reeve, J., and Duchac, J. (2012) Financial and Managerial Accounting. South-Westerern Cengage Learning, Natorp Boulevard, Mason.

34. Wildavsky, A. (2009) Budgeting and Governing. Transaction Publishers, London.

35. Yukl, G. (2011) Contingency Theories and Effective Leadership, ch 21, The SAGE Handbook of Leadership. SAGE, London.

9.0 Appendices

1. Questions for Methodology:

2. Can you explain a feeling or an emotion relating to each of the words listed below?

1. Can you explain how much you enjoy working at David Lloyd?

_________________________________________________________________________________________________________________________________________________________

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a) Budget b) Finance c) Investmentd) Labour e) Managementf) Members g) Pressure h) Profit i) Stress j) Team

4. a) On a scale of 1 – 4, how do you believe your annual budgets affect your work performance?

Low 1 2 3 4 High

b) Can you explain why you selected this number? __________________________________________________________________________________________________________________________________________

3. a) On a scale of 1-4, how confident are you with financial figures and numerical data when it comes down to costs?

Low 1 2 3 4 High

b) i) Do you feel you are under pressure by higher management into reaching your set targets? ii) How does this make you act as a manager?

_________________________________________________________________________________________________________________________________________________________________________________________________________

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6. How is your relationships with the other departments within the business and can you explain some of the feelings?

__________________________________________________________________________________________________________________________________________

8. a) How does meeting your set budgets affect your work performance?

__________________________________________________________________________________________________________________________________________b) Providing relevant examples, can you explain how much time and effort you put into your work when it comes to achieving your budgets/targets? __________________________________________________________________________________________________________________________________________c) Budgets are set to be a short-term plan; do you think budget are long term or short term? Expand__________________________________________________________________________________________________________________________________________

5. a) Can you tell me how important communication is towards the business? __________________________________________________________________________________________________________________________________________________

b) When it comes to achieving the overall annual budgets for the business, how is the communication between yourself and:

i) Head office:

ii) Senior management team

iii) Other Departments

_________________________________________________________________________________________________________________________________________________________________________________________________________

7 a) On a scale of 1-10, how do your monthly budgets/targets affect your motivation to carry out your set job within your department?

Low 1 2 3 4 5 6 7 8 9 10 High

b) Can you expand of this please? _________________________________________________________________________________________________________________________________________________________________________________________________________

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d) Does keeping your staffs content and motivated mean more to you than achieving your budgets? Explain _______________________________________________________________________________________________________________________________________________________________________________________________________________

10. Scenario 1: a) Your management team have decided to increase your set budgets with a 15% incline

from the previous year; how do you react? ________________________________________________________________________________________________________________________________________________

b) Since you achieved your budgets this year a lot higher than expected with not so much labour, your management team have decided to cut your labour costs by 15 hours a week in your department; how do you respond? _______________________________________________________________________

________________________________________________________________________

11. Competition plays an important part when trying to achieve budgets. Can you explain how competition might affect achieving your budgets? Include from within your own department, other departments and other businesses/organisations.

__________________________________________________________________________________________________________________________________________

9. Comparing last year’s annual budget to this years, what strategy and actions are you planning to certify that you will reach the set targets? Examples include complete restructure of the department, increase motivation within the department, improve team cohesiveness etc.

_________________________________________________________________________________________________________________________________________________________________________________________________________

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14. Can you explain why you think strategic planning and control over your budgets can affect the business?

_______________________________________________________________________________________________________________________________________________________________________________________________________________

12. External factors within a business can have a major impact when it comes to targets. Using the PESTLE analysis, can you identify, on a scale of 1-10, how much of on an impact each component has on your job?

Political (Government): Low 1 2 3 4 5 6 7 8 9 10 High

Economic:Low 1 2 3 4 5 6 7 8 9 10 High

Social:Low 1 2 3 4 5 6 7 8 9 10 High

Technological:Low 1 2 3 4 5 6 7 8 9 10 High

Legal:Low 1 2 3 4 5 6 7 8 9 10 High

Environmental:Low 1 2 3 4 5 6 7 8 9 10 High

13. a) Out of the PESTLE analysis, which component do you think affects you from reaching your budget the most?

___________________________________________________________________b) Can you verify your answer?

_________________________________________________________________________________________________________________________________________________________________________________________________________

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Table 1.

Question 2 Words associated with financial topics

Subjects A B C D E FBudget Excited Winning Stress Tasky Job Important

Finance Clear Money

What’s the pot? Balance Boring

Interesting

InvestmentReally excited Improve Great Exciting Excited Exciting

LabourChallenging Best staff

Use of time

HR, people management Fun-team

Frustrating/rewarding

Management Simple

Looking after staff Strong

Responsibility Control

Interesting

Members Love them Retention HappyExceeding expectations

Mostly nice

Important/dependant

Pressure Fun Reactive Sad Inevitable StandardMotivating

Profit Amazing

No point if you don't get profit Good Goal/target

Satisfaction Yay

Stress Always PressureNot good

Pressure, always

Apart from last 2 days - positive Apparent

Team ImportantSame goals Great Reach goal Happy

Community

Figure 1

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A B C D E F0

0.51

1.52

2.53

3.54

4.5

Confidence Scale on Financial Figures

Confidence Scale

Subjects

Scal

e

Figure 2.

2

4

How do budgets affect Work Per-formance on a scale of 1-4

12

Figure 3.

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A B C D E F0123456789

10

Budgets affection on motivation

Motivation

Subjects

Scal

e

Table 2.

PESTLE ANALYSISPESTLE/Subjects A B C D E F AveragePOLITICAL 8 9 5 8 5 6 6.833333333ECONOMICAL 10 10 7 9 9 8 8.833333333SOCIAL 8 7 9 8 7.5 9 8.083333333TECHNOLOGICAL 8 5 8 8 3 7 6.5LEGAL 8 10 5 9 9.5 8 8.25ENVIRONMENTAL 8 10 7 9 9 8 8.5

Figure 4.

POLITICAL

ECONOMICAL

SOCIAL

TECHNOLOGICAL

LEGAL

ENVIRONMENTAL

0

5

10

Average of PESTLE Analysis results

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Table 3. The component that mostly affects managers from reaching their budget.

Subject ComponentA EconomicB LegalC EnvironmentalD EconomicE EconomicF Economic

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Luke Jones 129010146 Dissertation -2

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