The evolutionary adoption framework: explaining the budgeting paradox

Purpose – Traditional budgets are seen by practitioners as being incapable of meeting the demands of the competitive environment and are criticized for impeding efficient resource allocation and encouraging dysfunctional behaviour such as myopic decision making and budget games. However, budgeting is still regarded as an organizational imperative and there is little empirical evidence that organizations alter their existing budgeting practices. To understand this paradox, a deeper understanding is needed of the process by which organizations decide on altering and renewing budgeting practices. The purpose of this paper is to present a framework which identifies the factors that play a role in the acceptance of changes to the budgeting process. Design/methodology/approach – The third author developed a model called the evolutionary adoption framework (EAF), which looks at four aspects that play a role in the process of accepting a management control practice by organisational members, in the sense that they are going to use the adjusted practice: activities in the adoption process, motives of the persons involved, constraints that may influence the activities, and order and interaction of activities. The EAF was applied on four Dutch organizations – two of which were contemplating or already changing the budgeting process and two who were not – to identify which factors are most important when making the decision to accept the changed process. By selecting two organizations that were considering or actually making a change to their budgeting process and two organizations that were not considering or undergoing such a change, it was possible to obtain valuable information about the factors from the mutual comparison. Findings – The research results confirm there is a paradox of a high degree of criticism on traditional budgeting and a low number of organizations that adopt adjusted practices. It seems that there needs to be a certain level of dissatisfaction within an organization before it starts to examine its current situation and search for alternatives. As such, it seems that some momentum for change needs to exist before changes are considered, rather than that organizations are continuously looking for the best possible alternative to their budgeting process. A lack of a need for change – because the process is considered satisfactorily efficient – is the most important factor why organizations are not considering changes to their budgeting process, followed by cognitive and preconscious constraints. Originality/value – The paper contributes to the accounting literature as it provides evidence on the factors that could influence the acceptance of changes in the budgeting process. Knowing these factors will increase the chance that managers can successfully introduce and implement an adjusted budgeting process.