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Selective Sequential Zero-Base Budgeting Procedures Based on Total Factor Productivity Indicators

Author

Listed:
  • A. Ishikawa

    (Rutgers University)

  • E. F. Sudit

    (Rutgers University)

Abstract

The authors' purpose in this paper is to develop productivity-based sequential budgeting procedures designed to expedite identification of major problem areas in bugetary performance, as well as to reduce the costs associated with comprehensive zero-base analyses. The concept of total factor productivity is reviewed and its relations to ordinary and zero-based budgeting are discussed in detail. An outline for a selective sequential analysis based on monitoring of three key indicators of (a) implicitly budgeted total factor productivity; (b) revenue growth; and (c) profitability; is suggested. It is argued that this approach is instrumental in promoting a more systematic performance analysis, which is capable of revealing hidden efficiency shortfalls and is potentially cost and time saving. Additionally, this type of productivity-based budgeting is shown (via use of an actual application) to provide all the informational inputs for a full-fledged analysis of expected budgetary distribution of productivity gains among various categories of employees, shareholders and customers.

Suggested Citation

  • A. Ishikawa & E. F. Sudit, 1981. "Selective Sequential Zero-Base Budgeting Procedures Based on Total Factor Productivity Indicators," Management Science, INFORMS, vol. 27(5), pages 534-546, May.
    • Handle: RePEc:inm:ormnsc:v:27:y:1981:i:5:p:534-546
    DOI: 10.1287/mnsc.27.5.534
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    Cited by:

    1. E. Grifell-Tatjé & C. A. K. Lovell, 1999. "Profits and Productivity," Management Science, INFORMS, vol. 45(9), pages 1177-1193, September.

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