Budgetary performance refers to the outcome indicators that reveal the relationship between customer funds and the goods or services provided by an organization. A performance budget is used to show how the organization performs during its operation including the associated revenue and expenses.
A reward system is a program that is set up by an organization with the aim to motivate its employees (Gitman, Juchau & Flanagan, 2015). Rewards, which are distinct to employee salary, are awarded in the form of commercial or physical goods, which have a cost to the company. Despite the perception that such systems are a domain of large corporations, small organizations are also instituting the concept to increase output performance and lure top personnel in the competitive market scene.
Ethical behavior is concerned with the actions an employee expresses and is consistent with corporate values. Ideally, ethical behavior is considered a positive for business operation since it incorporates actions that exhibit respect for moral principles such as quality, fairness and cultural diversity (Giorgini, et al., 2015). The paper will demonstrate the concepts of budgetary performance, rewards, and ethical behavior through an analysis of a case study that will delve into the actions of Linda, the marketing manager, plant manager, and division controller.
Lindas actions are not ethical. While administering the budgeting process, Linda deliberately misinterprets the financial capabilities of her division for her gain through the organizations rewarding system. In ensuring that she attains the budgeted profits, she alters the accounting procedure. Lindas actions are unethical since she is not honest with the management regarding the actual expenses and benefits. Practicing ethical behavior requires an individual to adhere to the organizations code of ethics (Giorgini et al., 2015). It should be explicit enough to demonstrate employee actions and what they should avoid. Furthermore, a rewarding system usually recognizes an individuals effort and performance that results contribute to work performance. Lindas decision is significantly manipulative and deceptive for personal gain as opposed to the interest of the organization. Therefore, her actions are unethical as they fail to honor the corporates value of upholding honesty.
The company cannot be liable to the association between employee incentives and job performance. Ideally, the organization wished to increase profit by motivating its employees to achieve more performance than what was disclosed in the budget. The reward system was solely aimed to give credit to performances, which surpassed the expectations and resulted in excessive returns. Therefore, the blame lies on the employees ethics whose actions lead to the manipulation of factors that have a linkage to performance.
Ideally, there are few, if any, genuine causes for differing sales closure. Therefore, if a marketing manager was requested to participate in the behavior, the first action must seek the actual reasons for seeking the request. Supposing no sound reason was presented, declining the request would follow. It is important to inform Linda that such actions would perilous to the organization since it would encourage fraudulent behavior and corporate malpractices in her division. She should be made aware that the reduction of profits in the current year and deferring to the next year reduces the organizations profits. Consequently, it would attract severe action by management because of employees failure to perform.
The act to defer closing sales to meet budgetary objectives is unethical. Assuming the request takes the nature of orders with no sound reasons, the correct course of action by a marketing manager should consider appealing to a superior manager within the organization. A deferment of closing sales would make the marketing manager liable to the unethical behavior by other employees within the division that will attract severe actions such as the institution of stringent objectives and employee monitoring during subsequent years (Fung, 2015). Indeed, deferring closing to increase the possibility of meeting the financial budget in the following year is not a sound decision.
It is a challenge to go against a common practice, which has the consent of the organizations plant managers. Ideally, if knowledge about the malpractice is widespread among the plant managers, it is possible that high-level managers are aware of the exercise and play a significant role in making adjustments or achieve bonuses in an unscrupulous manner. Consequently, it enhances outcomes that are believed to be accurate through corporate deception and information closure.
According to Carson (2010), salespersons and individuals in an organization who do not possess fiduciary obligations should express a substantial duty to disseminate information and provide warnings. The deontological theory suggests that lying is an immoral act especially if the liar must express the truth. The plant manager could conduct an investigation and examine the extent which top managers are aware of the padding activities. Gaining insight of the managers awareness will play an essential role in choosing an appropriate action. Correspondingly, the manager could obtain advice from other individuals on how to conduct himself to avoid conflict with others.
If it is evident that the practice is somewhat acceptable, the manager will choose whether to continue working for an organization which accepts deceptive action or ignore the action and simply reports on what he or she perceives is achievable. Ideally, the correct approach would be to report the truth as doing anything else would be violating the organizations code of ethics. Obviously, providing a report, which goes against the common practice that falsifies information to gain bonuses, will be met with resentment by other managers. Consequently, the situation will contribute to conflict among the companys personnel. Therefore, the appropriate action is for the manager to report on the truth despite the unknown consequences of the action.
The act of accelerating the acknowledgment of corporate expenses belonging to a later period is a pure violation of the code of ethics for accounting staff. According to (), a management accountant must provide a report in a fair and objective manner. Thus, accountants should disclose all information in a manner that is likely to influence another individuals comprehension of the financial reports. Furthermore, management must disseminate their duties using the customary laws, principles, and standards (Gitman, Juchau & Flanagan, 2015).
Accelerating the recognition of corporate expenses disregards the conventional accounting principles. Therefore, the first course of action is to tell the divisional manager that undertaking such activity is wrong. Fung (2015) posits that falsification of corporate expenses and revenues is a serious offense that has the potential to cause substantial monetary losses and lawsuits. If an employee is found to provide false information, he or she may face severe action that may include paying fines or incarceration depending on the severity of the action.
Suppose the division manager persists in their quest, it is prudent to tell him or her to put the request in writing as evidence for future. Ideally, the request to put the request in writing will not solve the problem since the general expectation is the division manager will decline to have his or her name. Otherwise, the correct approach would be to relay the instruction to a superior manager or inform the audit committee about the action. Consequently, prevents one from violating the organizations code of ethics, which would amount to financial losses.
Justification of employee performance is essential for improving individual morale. Linda misinterprets financial records of her division for her gain to gain rewards. The organizations rewarding system does not recognize individual effort and performance to improve morale. The reward system is aimed to give credit to performances which surpassed the expectations and resulted in excessive returns. The organization should provide an improved rewarding system that aims to identify an individuals performance and awards incentives based on their actions to avoid the manipulative behavior (Howard, Turban, & Hurley, 2016) It is also critical for management to consider goals when rewarding their employees to ensure the company performs according to expectations.
Top managers should also raise employee awareness concerning the ethical and legal implications of their decisions. Many employees fail to honor an organizations code of ethics. Actions such as the falsification of financial records and closure of critical corporate information have several implications for individuals who fail to report to management since the actions could lead to financial losses and embezzlement of funds. Failure to uphold ethical conduct while implementing a decision could attract lawsuits, loss of jobs and incarceration. Therefore, managers should ensure their subordinates work and adhere to the accepted laws, principles, and standards
Carson, T. L. (2010). Deception and Information Disclosure in Business and Professional Ethics.Fung, M. K. (2015). Cumulative prospect theory and managerial incentives for fraudulent financial reporting. Contemporary Accounting Research, 32(1), 55-75.
Giorgini, V., Mecca, J. T., Gibson, C., Medeiros, K., Mumford, M. D., Connelly, S., & Devenport, L. D. (2015). Researcher perceptions of ethical guidelines and codes of conduct. Accountability in Research, 22(3), 123-138.
Gitman, L. J., Juchau, R., & Flanagan, J. (2015). Principles of managerial finance. Pearson Higher Education AU.Howard, L. W., Turban, D. B., & Hurley, S. K. (2016). Cooperating teams and competing reward strategies: Incentives for team performance and firm productivity. Journal of Behavioral and Applied Management, 3(3).
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