Hopwood claims that there are three styles of management evaluation using budgets. Discuss these (using illustrations) and some of the dysfunctional effects of using budgeting control systems in large organisations.

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Hopwood claims that there are three styles of management evaluation using budgets. Discuss these (using illustrations) and some of the dysfunctional effects of using budgeting control systems in large organisations. Comment on why you think budgeting is prevalent in organisations despite these consequences.

Budgets are one of the most frequently used devices for planning and controlling organisations. They are designed and used to provide management with a forward-looking perspective, with which they are able to exploit opportunities and anticipate future problems. A budget itself can be described as a quantitative expression for a set time period of a proposed future plan of action by management.1Budgets are used both as co-ordination mechanism, helping to co-ordinate efforts throughout the sub-divisions of the company and also as a motivational device as it provides incentives for correct action. However budgeting is a major feature of most management control systems and is widely used as a control tool for the following reasons: It provides a benchmark for activity and performance evaluations and it helps to analyse the consequences of particular actions and provides the necessary feedback to the initial plan. For instance, with regards to performance evaluation, budgets are used to provide lower-level managers