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Uses of Budget as contracts of fixed performance

. Budget is used as a fixed performance contract in various organizations as it helps in the formal theoretical emphasis of incentives for individuals within the organizations. It also assist in the motivation of the individuals to work and elevate the organizational performance. Most organizations employ workgroups reflecting the collective effort for multiple individuals leading to a massive compensation group that require the application of the fixed budget performance to manage. The most criticism is that budget always serve as implicit or explicit fixed contract performance contract (Libby & Lindsay, 2010).

The general nature of such a contract is that if its actual or real performance reaches a given predicted budget, the organizational performance would be regarded satisfactory or good leading to more benefits. It is also believed that fixed budget targets presents bad level for performance evaluation when the factor leading to the budget may have been altered or changed within the budget period. During the performance evaluation, there was analysis by respondents for the rating of the level of emphasis for meeting budget targets within the performance evaluation of an organization. The result was that about 52% of the Canadians respondent and 71% American respondents indicated an increase of the budget emphasis. Prevalence of the application of fixed performance contract was performed in both groups and 12% of Canadians responded for high budget emphasis with 17% American respondent feeling the same. The data analysis and interpretation of the entire process reflect that increase in gaming can negatively influence a business unit performance within a market cycle.

The concept of fixed performance contract is defined as the fixed targets that are usually negotiated before starting of the budget period. The incentive compensations are based on the extent of achieving the target during the period. During the period of Great Society as well as Vietnam War, budgets were considered as the agreements of fixed performance between the management as well as the staff, in which the budgets were focused primarily on predicting of the revenue and the disbursement of the future. The budgets that are used for the resource allocation as well as evaluations of the performance does only eliminates the slack of budget but it also increases the efforts of the subordinates and the performance of task. This approach of traditional budgeting is criticized intensely and most of the companies are making plans for abandoning it. The organization need for embracing technology for embracing the technology for easing the pain and increasing the productivity (Cardoş, 2014).

The survey by the author has found that the evidences do not supports the key assumptions of BBRT of fixed performance contract prevalence in the practice. It is remarkable that few firms uses budget in this way for the evaluations of performance. However, subjectivity in the evaluation of performance is relatively widespread (Libby & Lindsay, 2010).