The achievability level in financial and other targets for listed company managers : a Maltese field study

Abstract

Purpose: This study aims at assessing and comparing the perceptions of c-suite and management on the level of difficulty at which targets are set in local listed companies. In order to achieve this overarching objective, the purpose of budgeting and its process will be examined to determine the reasoning behind the way targets are set. Furthermore, the management’s satisfaction with the budget process and participation adopted will be assessed, and compared to the perception held by c-suite. Design: The analysis was conducted through the use of a sequential mixed methodological research. First, semi-structured interviews were carried out with seven Maltese Listed Companies (MLCs). Following the interviews, questionnaires were distributed to their managerial staff to attain their perception on the subject matter. The results were subsequently analysed individually, before creating a comparison of perceptions. Findings: The findings of this study show that one budget is maintained in MLCs for conflicting budgetary purposes, suggesting that a compromise in the budget is made. Furthermore, there is no formalized target-setting structure in place in MLCs, causing increased ambiguity for management in respect to their position in the organisational structure. Whilst Chief Financial Officers (CFOs) boasted about their budget process, management were less satisfied with this, causing a disparity in perceptions. The root of this issue could be traced to another finding, in which participation was found to be used only in the early stages of the budgetary process. Overall, it was found that whilst CFOs believe that their targets are easily attainable, management perceived them as slightly more difficult to achieve. Conclusions: The findings conclude that targets should be set at a level which is easily attainable if pressure to achieve these targets is exerted. From the percentages provided, it was deduced that this in the range of 80%-90% achievable. Value: The emergent findings indicate the level of achievability of financial and other targets set in MLCs. The findings, as well as the recommendations put forward, seek to provide guidance to target-setters in MLCs on their respective budgeting process.