Developing a method for deriving minimum financial outcomes to solve budgetary slack – a practical approach
Budgetary slack is perceived as a harmful and constant problem management accountants, who are responsible for controlling subsidiaries, are facing. So far literature offers different budgeting conceptions that are assumed to be budgetary slack-reducing. However, for advanced budgeting only a small amount of research has been added to the literature. Therefore, this paper adds to the body of advanced budgeting-literature by addressing the question if advanced budgeting-techniques, respectively benchmarking, rolling forecasts and complexity reduction, are able to reduce budgetary slack. Based on interviewing practitioners, I develop key performance indicator (KPI)-systems for each core segment of energy industry. The KPI-systems are used for identifying which value drivers are meaningful for benchmarking and further solve as a limited list of report-worthy KPIs. Using subsidiaries’ data from a big German energy supplying company (EnBW AG) I develop small case studies that show benchmarking examples and present these to five practitioners, who qualitatively rate the techniques whether they are able to reduce budgetary slack. Qualitative results indicate that benchmarking and complexity-reduction affects slack negatively, while rolling forecasts only affects slack in specific circumstances. Further, the approach taken can solve as a guideline on how to implement these techniques into a company.