Enabling Budgetary Control System and Organizational Performance: An Empirical Study

This study investigates the role of managerial cognitive capability (MCC) and decentralization of decision rights (DDR) in promoting the design elements of the enabling control systems. Drawing on the endogenous organizational routine change framework (Feldman & Pentland, 2003) and enabling budgetary control literature, this research argue that MCC and DDR make it possible for organizations’ staff to specialize in exploring and mobilizing idiosyncratic and decision-relevant information. Updated with such knowledge and skills, they subsequently have the impetus to introduce changes in routine budgetary practices and develop budgets as enabling control systems. Leveraging on data collected from a survey of senior managers in municipalities in Bangladesh, this research examined the predicted relationships among the variables. Our empirical evidence reveals that both explanatory variables significantly contribute to the development of Adler and Borys’ (1996) four enabling design features in the budgetary control system. Each feature, as a consequence, mediates the impacts of organizational flexible characteristics on how well organizations function. The theoretical insights of this novel study are necessary in order to develop a holistic understanding of how an enabling framework works. The actionable insights derived may also assist organizations in tailoring their budgets to improve adaptability, innovation, and strategic alignment and optimizing the allocation of resources. The findings also suggest that managers should consider factors like revenue diversification (RD) and size of their operations because these can influence budgetary control systems in allocating resources for the purpose of improving overall performance.