Executive Summary
BNE Pty Ltd is a specialty frozen-food processor that has achieved significant business success. That is why the leading purpose of the given report is to comment on what changes should be implemented so that the company can effectively assess its performance. Every employee should be valued, which denotes that a negotiating budgeting approach should be implemented. This strategy ensures that budget development is a shared responsibility of executives, managers, and employees. The organization also requires a modified reward system that also relies on factors that improve employees’ intrinsic motivation. Finally, the report comments on four non-financial performance measures that can be used to assess the effectiveness of the Purchasing, Processing, Sales, and Administration divisions.
Introduction
BNE Pty Ltd is a successful business that has increased its sales within Australia and received some offerings from foreign partners. The growth in business activities implies that management should take appropriate decisions to ensure that the organization meets new opportunities and challenges. Managers should draw specific attention to financial affairs because budgeting and reward plans can significantly affect organizational performance and outcomes. Thus, the current analysis reveals that BNE needs a different budgeting style and a new reward system because the focus on financial performance measures can adversely affect performance results.
Considering BNE’s Budgeting Style
The case study indicates that Nick Williamson, the company’s chief executive officer, and Lynette Reid, the company’s chief financial officer, are the only responsible individuals involved in determining financial targets. According to Nafisatu (2018, p. 15), this approach is also known as imposed budgeting, implying that top management develops budget plans while lower-level employees and managers are expected to execute them. Even though this approach is advantageous because it is time-consuming, some drawbacks arise. On the one hand, this approach is negative because it makes employees feel that their opinions are ignored and not valued in the organization. On the other hand, this strategy results in the fact that few people are engaged in budget development. This information implies that the created plan can be more subjective and lack versatile expert opinions.
That is why it is reasonable for the chief executive officer to use a different budgeting style. A suitable option refers to the negotiating budgeting approach because it offers essential benefits. This strategy implies that executives establish specific goals that they would like to be achieved, but lower-level managers and employees have the right and opportunity to express their opinions to modify the plan. That is why Nafisatu (2018, p. 15) stipulates that this strategy implies the shared responsibility between the managers of all levels. Even though a negotiating budget is time-consuming and can lead to arguments among employees, managers, and executives, its positive effects can be considered more significant. Since all stakeholders are engaged in the budget development, they will be more motivated to abide by this plan.
Analyzing a Financial Performance-Based Reward System
As mentioned in the case study, the organization relies on a financial performance-based reward system implying that the amount of compensation depends on how well the employees have achieved the stipulated goals. This system is popular today, and it implies both pros and cons. On the one hand, this approach is advantageous because it increases employees’ motivation (Taylor and Alla, 2018, p. 4). Simultaneously, the researchers indicate that this strategy helps organizations reach their objectives since workers are more committed to performing their tasks and meeting expectations (Taylor and Alla, 2018, p. 4). On the other hand, negative aspects are also present, and they refer to the fact that increased motivation is short-term. After a certain period, employees will get accustomed to financial rewards, and their commitment will start declining. In addition to that, the workers that will not receive rewards will be less motivated, which will adversely affect the performance outcomes of the entire organization (Taylor and Alla, 2018, p. 4). That is why BNE can consider using a different reward system.
According to the information above, the current reward system should be modified. According to Taylor and Alla (2018, p. 6), a suitable option is to affect employees’ intrinsic motivation. On the one hand, it is possible when workers are provided with tasks that require creativity, innovation, and critical thinking (Taylor and Alla, 2018, p. 5). On the other hand, intrinsic motivation facilitators include career growth opportunities, personal achievements, and other offerings. This information demonstrates that it is reasonable for BNE to reconsider its approach to the current reward system to ensure that this phenomenon leads to positive outcomes for the entire organization.
Introducing Non-Financial Performance Measures
As has been mentioned above, the reliance on financial performance measures can be negative. One can include additional examples that confirm the given statement. Taylor and Alla (2018, p. 4) mention that this approach can result in an increased financial burden for a company if many employees start performing above expectations. Furthermore, it is impossible to ensure that a person can be rewarded for completing every task. This suggestion denotes that completing a selected number of activities is only subject to rewards. Consequently, employees will be less motivated to deal with tasks that are not associated with any financial returns.
That is why it can be reasonable for BNE to rely on non-financial performance measures. According to Omran et al. (2021, p. 656), these phenomena are closely associated with productivity, meaning that managers can rely on them to assess how efficiently employees and divisions perform their tasks. Specific measures and their rationale will be offered for four divisions, including Purchasing, Processing, Sales, and Administration. As for the Purchasing division, its performance can be assessed according to the effectiveness of the organization’s supply chain. This measure will demonstrate how productively the division finds the required resources. The Processing department will be evaluated as per the operations volumes, meaning that these employees should focus on how many products they have processed. As for the Sales division, customer relationships are a significant metric. This performance measure refers to how satisfied customers are with BNE products. Finally, the Administration department can be assessed as per the relationship between employees and managers. In particular, it is reasonable to look at retention rates, employee satisfaction, and other non-financial indicators. The analysis of these measures can comprehensively describe the organization’s performance.
Conclusion
The paper has considered the budgeting and financial affairs of BNE Pty Ltd. It has been found that the organization should use a negotiating budgeting approach and a reward system that focuses on employees’ intrinsic motivation. The report has also commented on the fact that supply chain effectiveness, operations volume, customer relationship, and employee-manager relationship are appropriate non-financial performance metrics needed to assess the effectiveness of the company.
Reference List
Nafisatu, A. D. (2018) Effect of budget and budgetary control on firms performance: a case study of the East African Portland Cement Company Limited. Doctoral dissertation. United States International University-Africa. Web.
Omran, M. et al. (2021) ‘Non-financial performance measures disclosure, quality strategy, and organizational financial performance: a mediating model’, Total Quality Management & Business Excellence, 32(5-6), pp. 652-675.
Taylor, A. K. and Alla, S. (2018) ‘Influence of reward systems on motivation-pros and cons based on current literature’, Proceedings of the International Annual Conference of the American Society for Engineering Management, pp. 1-8.