Article Review – Book Report/Review Example
Paying People to Lie the Truth about Budgeting Process Assuming that not every portion of a manager’s compensation is dependent on the budget, then the manager will lack the incentive to manipulate, lie, or leave the information when constructing it. Therefore, the integrity of the organization can be restored and budget constructed and used not for the purposes of gaming but rather making tradeoffs that exist at the management of company’s activities. The article “Paying People to Lie: The Truth about Budgeting Process” evaluates the hindrance implications of the budgeting process to measure the organizational performance and compensation systems. Compensating the employees relative to the budget performance makes the workers to game the compensation system in various substantive methods. Every level of organizational workforce is responsible in formulating the budget. Hence, depriving the budgeting process important information needed to align the activities of an organization. Additionally, the workforce gambles with the objective of the budgeting process, which destroys the organization value. The article elaborates ways in which the managers and companies can stop the hindrance cycle. The implications bases on the destruction of the budgeting process and change the mechanism in which the firms pay their employees.
According to my opinion, the highly hindrance behavior can be stopped by shunning from using budgeting in both promotion and compensation formulas for managers and other employees. Meaning that, the kinks, non-linearity, and discontinuities have to be removed from the employees and manager’s pay for performance profile. The linearly compensation mechanisms offer no incentive to distort, lie, or gaming the compensation systems. What has not been extensive on the budgeting process is the cost of compensation system. Therefore, when the problem is resolved the value and productivity will rise. It is estimated that productivity will rise from 50 to 100 per cent. When the target and the budget systems are not present, the LBO firms and the entrepreneurial firm will record an increased productivity. Additionally, when the budget and target induced gaming systems are eliminated from the system of management, the major sources that results to loss of organization integrity will also be eliminated.
Jensen, Michael C.. "Paying People To Lie: The Truth About The Budgeting Process." European Financial Management 9.3 (2003): 1-15. Print.