LAGUNA COLLEGE OF BUSINESS AND ARTS

School of Graduate Studies

MANAGERIAL ACCOUNTING
RESEARCH CONCEPT PAPER

Name and Signature:

Alo, Jhoanna Marie
Parpado, John Breech
Ravena, Kammile

Proposed Title
THE IMPACT ON THE BUDGETING PROCESS FOR 2021 OF SEVERAL JOLLIBEE STORES
FROM LAST YEAR PERFORMANCE.

Specific Topic(s)/Area(s) in Managerial Accounting Covered by your Study

BUDGETING

Background of the Study

The budgeting process involves planning for future profitability because earning a reasonable
return on resources used is a primary company objective. A company must devise some method to deal
with the uncertainty of the future. A company that does no planning whatsoever chooses to deal with
the future by default and can react to events only as they occur. Most businesses, however, devise a
blueprint for the actions they will take given the foreseeable events that may occur. Shows
management’s operating plans for the coming periods Formalizes management’s plans in quantitative
terms Anticipate results, and take action to remedy possible poor results Motivate individuals to strive
to achieve stated goals.

Almost every organization should prepare a budget. Regardless if an establishment is large or

small, the impact of a budget affects almost every organization. Budgets are a critical component of the
success of the business (Wildavsky, 1975). The budget is also considered a significant tool for strategic
planning to provide management with crucial information towards reaching desired goals. Budgets can
also provide support for an organization to ensure effective and efficient use of economic resources. A
budget is a reflection of an organizations financial operating plan. Steps to a successful budget process
are determined by the priorities set by the organization. The budgeting process usually consists of
repetitive rounds of the negotiation with give and take between the participants. Budgets are prepared
by people. When employees are involved in the budget process, Tanase (2013) believed that there is a
possibility of realizing amazing benefits to the organization. Tanase also indicated that in order to
ensure budgets are fully employed, a collaborative approach maybe a superior alternative in
comparison to an approach without collaboration.

Statement of the Problem

This study aims to identify the impact on the budgeting process for 2021 of several Jollibee stores from
last year performance. Specifically it gears to answers the following:

1. How last year performance did affect your budgeting process for 2021?

2. What data did you use to come up for your 2021 budget?
3. Based on the result of the study, what output can be proposed and developed?

Objectives of theStudy

The primary objective of this study is to:

1. To determine how last year performance has an effect on their budgeting process for 2021.

2. To know the data that they use to come up for their 2021 budget.

3. To develop and proposed an output based on the result of the study.

Literature Review

Companies, nonprofit organizations, and governmental units use many different types of
budgets. Responsibility budgets are designed to judge the performance of an individual segment or
manager. Capital budgets evaluate long-term capital projects such as the addition of equipment or the
relocation of a plant. This chapter examines the master budget, which consists of a planned operating
budget and a financial budget. The planned operating budget helps to plan future earnings and results
in a projected income statement. The financial budget helps management plan the financing of assets
and results in a projected balance sheet. The budgeting process involves planning for future
profitability because earning a reasonable return on resources used is a primary company objective. A
company must devise some method to deal with the uncertainty of the future. A company that does no
planning whatsoever chooses to deal with the future by default and can react to events only as they
occur. Most businesses, however, devise a blueprint for the actions they will take given the foreseeable
events that may occur.

The planning process that results in a formal budget provides an opportunity for various levels of
management to think through and commit future plans to writing. In addition, a properly prepared
budget allows management to follow the management-by-exception principle by devoting attention to
results that deviate significantly from planned levels. For all these reasons, a budget must clearly
reflect the expected results.

Failing to budget because of the uncertainty of the future is a poor excuse for not budgeting. In
fact, the less stable the conditions, the more necessary and desirable is budgeting, although the process
becomes more difficult. Obviously, stable operating conditions permit greater reliance on past
experience as a basis for budgeting. Remember, however, that budgets involve more than a company’s
past results. Budgets also consider a company’s future plans and express expected activities. As a
result, budgeted performance is more useful than past performance as a basis for judging actual results.

Theoretical/Conceptual Framework

The theoretical framework for this study was Hofstede’s (1968) theory of budgeting. The theory
proposed encompasses collaborative budgeting and expands on Hofstede’s understanding that
budgeting can be a significant tool for managers. The research instruments used in this study were
structured interviews. The questions were developed from the work of Hofstede. Hofstede’s (1968)
theory has a direct reflection on the collaborative budgeting process, which will consider if
collaborative budgeting theory or if another budgeting theory can be used to make decisions and to
plan effectively. This notion is the foundation of my study. Active and collaborative participation could
potentially lead to other unexpected results that will help to promote an accurate budget process. One
result that Hofstede (1968) indicated was that if employees are involved in decision making, including
budget decisions, “they appear to be much more motivated to fulfill the financial standards that are
set”. If critical members of the organization are included in the process, there will likely be a much
more realistic and achievable budget target amount. In particular, Hofstede’s (1968, 2001) theory of
cultural dimensions provided the foundation for this research study. One of the theories developed by
Hofstede was the notion of power distance. Low power distance, with a focus on participative
orientation, is the basis for collaboration to be successful. Low power distance theory utilizes influence
and communication skills in order to create an effective plan. Low power distance refers to the
disparity between those who have authority to make decisions to those who do not. Inclusive
discussions which 14 allow for challenges and questions are also a factor with Hofstede’s theory of low
power distance. With an inclusive policy on fundamental business decisions; collaboration could help
employees and the organization achieve greater success.

Conceptual Framework
The basic steps of budgeting have changed little in the past century (Hofstede 1968). Lazenby (2013)
compares two theories of budgeting. This first approach to budgeting theory, according to Lazenby is
Theory X or the traditional approach to budgeting. Lazenby compared the traditional approach to
budgeting to 16 Theory Y which is an updated version or a newer approach to budgeting. The theories
presented and researched by Lazenby supplement Hofstede’s theory of budgeting. Hofstede’s theory of
budgeting is the basis for this research study. Lazenby (2013) found that the traditional approach to
budgeting was an approach that was forced down from the top. The overall reason for an authoritative
approach to budgeting was that of control. Control is often defined as how many subordinates a
manager can effectively and efficiently impact (Young, 2010). Lazenby stated that “the upper levels of
the organization needed to control both the work practices of employees and their access to and use of
organizational resources” Lazenby did not determine if this was the superior budgeting method or not.
However, Lazenby concluded that the traditional approach to budgeting could lead to game playing.
Lazenby described game playing as simply agreeing with anything that was presented to operational
managers, rather than taking initiative towards improvement. Ultimately, as Lazenby noted, the game
playing began “in the way they (employees) participate in the budget process”. Within the traditional
approach to budgeting, as Lazenby (2013) further discovered, participation is not always evident. The
behavior of those involved, directly or not, is predictable and a “natural result of a centralized, top-
down budget system” Lazenby did not delve into the merits, or lack thereof, with traditional budgeting.
The belief was that this process could work for some organizations depending on the leadership of the
organization. However, Lazenby concluded that although managers are not necessarily included in the
up-front preparation of the budget document, with a traditional approach, the managers become very
astute at playing a budget game in order to achieve their own agenda. In comparison to a traditional
approach (Theory X), Lazenby (2013) offered an alternative to the budget process which was referred
to as Theory Y in Lazenby’s research study. In contrast to Theory X; Theory Y considered a bottom-up
approach to the budgeting process. This approach is more inclusive as managers “adopted an
empowering and encouraging attitude in personal interactions with their employees. They delegated
meaningful work to their midmanagers, and tried to avoid micro-managing”.The reasoning for this
alternative, according to Lazenby, was to allow the mid-level managers the freedom to improve the
process and to promote intelligent managers towards leadership positions rather than as administrators.
Lazenby was cautious in suggesting that Theory Y was superior to Theory X. The skepticism was
apparent when Lazenby concluded that “a new management philosophy, or management style, won’t
make any difference in an organization with the same old plumbing” The success of the budget
process, within an organization, will usually depend on the management style and the perception of
employee attitudes. If a company adopts a traditional approach to budgeting, either the Theory X or the
Theory Y approach to budgeting, employees, according to Lazenby, requires a sense of purpose which
could be a very strong motivator. Heinle, Ross, and Saouma (2014), made a similar conclusion in their
research study regarding participative budgeting.

Proposed Research Methodology (Design, Respondents/Participants, Instrument/Treatment of

Quantitative or Qualitative Data))

Qualitative Research Approach

 A qualitative research approach for this study was chosen because qualitative methods are
especially useful in discovering the meaning that people give to events that they experience (Merriam,
1998). Specifically, the phenomenological method was used to understand how participants make
meaning of the phenomenon being studied; i.e., the effect of last year performance on their 2021
budget. Phenomenology is effective in studying a small number of subjects – in this case, 10
participants – to identify the core of their experiences with the phenomenon (Creswell, 2003) and to
produce patterns and identify relationships of meaning that build new knowledge (Moustakes, 1994).
The qualitative research methods used for this study are described further below and included
purposive sampling, open-ended interviewing, and systematic and concurrent data collection and data
analysis procedures. Specifically, the grounded theory or constant comparative method (Glaser &
Strauss, 1967) was used to analyze the data and discover the meaning of budgeting process of several
Jollibee stores.

Research Design Procedures for selecting study participants and collecting and analyzing data
are described in this section. 10 Managers were selected for participants in this study since they would
be “knowledgeable informants” (Lincoln & Guba, 1985,). Because the goal of the study was to know
how did they come up for 2021 budget. Once potential participants had been identified, an e-mail was
sent to them with the Informed Consent Form that included a description of the research study,
research procedures, risks and benefits of participation in the study, participant rights, and protection of
confidentiality. Managers who signed the consent form became participants in the study and received
details about the interview process and procedures along with a copy of the Interview Protocol
Recruitment and interviews of participants concluded when data saturation occurred and the
information received from the interviewees began to be redundant (Merriam, 1998).

References

Management accounting Chapter 12 : Budgeting. (2019, February 9). Share and Discover Knowledge
on SlideShare. https://www.slideshare.net/PeleZain/management-accounting-chapter-12-budgeting

Hornstein, A., & Zhao, M. (2011). Corporate capital budgeting decisions and information sharing.
Journal of Economics & Management Strategy, 20(4), 1135-1170. doi:10.1111/j.1530-
9134.2011.00312x.

Maxwell, J. A. (2005). Qualitative research design (2nd ed.). Thousand Oaks, CA: Sage Publications,
Inc

https://courses.lumenlearning.com/managacct/chapter/introduction-to-budgeting-and-budgeting-
processes/