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Core and periphery dynamics of budget evaluation during crisis: the evolution of an impromptu solution

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Abstract

The accounting literature has highlighted the role of budgeting practices in steering organisations through periods of crisis. This paper adds to this literature by drawing attention to the core and periphery dimensions of crisis-related budgetary performance evaluation. Our analysis focuses on a public hospital (periphery) operating under the guidance of a national board of management (core) during an economic and fiscal crisis, which triggered a sudden and substantial reduction in hospital funding and a significant increase in the demand for services. Exploring the role of budgetary practices in this multi-tiered setting, we identify a crisis response where budgetary evaluation was prioritised at both core and periphery levels. Examining the core and periphery separately, we observe an intensified evaluative approach at the core which triggers at the periphery an approach which placed boundaries around organisational activities via the centralisation of expenditure decisions. This response—which we identify as being an impromptu solution—may have been considered sub-optimal at the time but in fact enabled budget compliance and increased service provision. Our analysis highlights the importance of budgetary practices for facilitating value alignment among key stakeholders in times of crisis. In particular, the paper advances a perspective which suggests that divergence in how core and periphery management evaluate budget performance can enable more to be done with less in crisis periods. Overall, these findings have implications for the operation of budgetary practices in response to crises, especially in multi-tiered decision-making contexts.

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Notes

  1. We assert that this situation can be characterised as a crisis, not only due to the extreme intensity of the budget reduction targets being imposed but also because of the close scrutiny from the media, government, and the international community, primarily due to the nature of the IMF bailout (Fink, 1986). Furthermore, this situation had the potential to inflict significant harm on the national economy. Failure to meet budget reduction targets not only jeopardised the availability of funds but also impeded the country's ability to exit the IMF Program (Kahn, 2013; King, 2002).

  2. We use the term 'economic and fiscal crises' to refer to the global financial crisis and credit crunch that began in 2008 and triggered economic and fiscal austerity pressures across most OECD countries over the course of several years. While many OECD countries have experienced persistent financial deficits since the 1970s, the scope and scale of the economic crisis and its impact on the public sector have been described as the most severe since the 1930s, akin to the Great Depression (Cohen et al., 2015).

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  1. University College Cork, Cork, Ireland

    Michelle Carr & Matthias Beck

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Carr, M., Beck, M. Core and periphery dynamics of budget evaluation during crisis: the evolution of an impromptu solution. J Manag Control 34, 411–434 (2023). https://doi.org/10.1007/s00187-023-00362-1

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