An exploratory study of operational reasons to budget

TLDR

Budgets are widely used but often criticized for their focus on performance evaluation. The study shows that organizations prioritize budgets for planning and control rather than evaluation, supporting their continued use despite criticism, and that rolling forecasts are employed alongside annual budgets for similar purposes, highlighting a gap between research focus and practice.

Abstract

Abstract Budgets are used widely but criticized, mainly for performance evaluation reasons. We find that organizations regard budgets as more important for planning and control than evaluation, thus proposing a rationale for their continued use irrespective of evaluation‐based criticisms. This finding is also important, because most extant budget research focuses on evaluation, suggesting a potential disconnect between budget research and practice. We also find that rolling forecasts are used in tandem with the annual budget in most organizations, and for the same reasons. This was unexpected, as coexistence suggests their adoption for different reasons.