PRACTICE OF EFFECTIVE RESOURCE BUDGETING AS A TOOL FOR PROJECT MANAGEMENT (A CASE STUDY OF ASKU PLC [AQUADDIS WATER BOTTLING COMPANY])


PRACTICE OF EFFECTIVE RESOURCE BUDGETING AS A TOOL FOR PROJECT MANAGEMENT (A CASE STUDY OF ASKU PLC [AQUADDIS WATER BOTTLING COMPANY])  

ABSTRACT

Analysis of the completed projects show that a significant number of projects exceed the planned time and costs and consequently reducing the benefits. Among many causes of project failure, it is widely recognized/ identified/that poor planning has an impact on project performance/success/. The main objective of the research presented in this paper was to assess the role of project planning on project performance in Asku Plc ,in Ethiopia. In addition the research explores that there is a significant relationship between effective resource budgeting and project management and Effective resource budgeting is used us a tool for project management;

In order to achieve the objectives, information of past/executed/ project was collected from ASKU Plc . A questionnaire survey conducted to collect data from the respondents that consisted of project manager, Operation Manager, Planning Manager, supervisors, and other staff who has a direct engagement on the Planning activities.. The study used SPSS version 24,correlation and other measure of central tendency is used to identify the importance of planning process/activities under each planning knowledge areas. The findings of the thesis indicate that the main planning input factors that affect the performance of planning processes are: - human, management, technical and organizational factors. And also the finding identifies the main problem areas in planning processes as risk, scope, quality human resource, and integration knowledge areas were inadequately/poorly/ performed in the studied project. This paper recommends an organization that conducts any project should improve the poor/inadequate planning performance of the identified knowledge areas. It is also important for the organization to spend more efforts in the identified planning activities to improve the performance of their project outcome.

Table of Contents

ACKNOWLEDGEMENTS i

ABSTRACT ii

List Of Tables v

Introduction 1

Background of the study1

Statement of the Problem4

Significance of the Study5

Research questions;6

Objective of the Study6

Limitations of the study6

Scope of the study6

Organization of the study6

2.0. Definition of terms 7

CHAPTER TWO 8

LITERATURE REVIEW8

THEORETICAL FRAMEWORK8

Project Management9

Empirical Literature Review13

Resource Budgeting14

Client Involvement17

Corporate Management19

Donor Requirements/Conditionalities22

Summary of the Literature25

CHAPTER THREE 26

3.0. RESEARCH METHODOLOGY 26

3.1 Research Design 26

Methods of data Analysis26

The Study Area27

Population of the Study27

Sample Size and Sampling Techniques27

Sources of Data Collection28

Instrument for Data Collection28

Validity of Research Instrument29

Reliability of the Instrument29

Administration of the Instrument30

Method of Data Analysis30

CHAPTER FOUR 31

4.0.DATA PRESENTATION, ANALYSIS AND INTERPRETATION 31

TEST OF HYPOTHESIS39

DESCRIPTIVE ANALYSIS OF PLANNING INPUT FACTORS40

DESCRIPTIVE ANALYSIS OF PLANNING KNOWLEDGE AREAS44

CHAPTER FIVE 47

SUMMARY, CONCLUSION AND RECOMMEDATION47

SUMMARY OF FINDINGS47

CONCLUSION48

RECOMMEDATION49

Bibliography 50

APPENDIX 1 55

List Of Tables

Tabel 1: The gender distribution of the respondents used for this study 31

TABLE 2:AGE DISTRIBUTION OF THE RESPONDENTS 32

TABLE 3: EDUCATIONAL BACKGROUND OF THE RESPONDENTS 32

TABLE 4: MARITAL STATUS OF THE RESPONDENTS 33

Table 5 :Significant relationship between effective resource budgeting and project management. 34

Table 6 Effective resource budgeting is a tool for project management 35

Table 7 Effective resource budgeting has significant effect on project management 36

Table 8:  Resource budgeting has a role to play in the availability of raw materials 37

Table 9  The practice of resource budgeting in most manufacturing companies 37

TABLE 14: Correlation Between Effective Resources Budgeting Vs Project Managment 39

Table 15: Descriptive statistics for human input factor 41

Table 16: Descriptive statistics for technical input factors 42

Table17: Descriptive statistics for organizational input factors 43

TABLE 18: Descriptive Statistics For Planning Knowledge Areas 44

List of Figures:

Figure 1: Conceptual frameworks of planning input factors, planning knowledge areas and project successes Error! Bookmark not defined.

ACRONYMS

ERB Effective Resource Budgeting

HF Human factors

MF

Management factors

PM Project management

PMBOK

Project management body of knowledge

PP

Project planning

CPM

Critical Path Method

TF

Technical factors

PIF

planning input factors

PPKA

project planning knowledge area

PO

project outcomes

WBS

work breakdown structure

PERT

Program evaluation and review technique

CHAPTER ONE:   Introduction

Background of the study

Budgets are known to have an important role to transmit the expectation of top management to lower levels. According to (KIABEL, 2010) budgets are used to communicate top management’s expectations to managers and employees. According to (Lucey, 2003), it is a quantitative expression of plan of action prepared in advance of the period to which it relates, expressed in money terms approved prior to the period.

(KIABEL, 2010) stated that, project management must make hard decision about the company’s future if project successes are to be expected. The best way to prepare for changing conditions is to provide frame works that contain a specific, but sufficiently flexible plan to accommodate unanticipated changes and the entire process of providing this frame work is known as budgeting.

Budgeting also helps management in planning, coordinating and controlling operations. If management will consider the most important one, it must create an environment accessible to a fully implemented budget program; this made us to understand that most attempts on budgeting even small ones will prove helpful. Effective resource budgeting affects the success of the projects. Elements of the resource budgeting include estimating the cost of the operations in the project, coordination among the organs involved in the project, effective communication, motivation of the employees, controlling the activities of the projects, and evaluating the budget utilization (KIABEL, 2010)

(Lucey, 2003)further urges that performance is influenced by many factors which includes planning and coordination, clarification of authority and responsibility, effective communication both internal and external, control of resources available, both human and non-human and motivation of both the lower and middle management. If the actual numbers delivered through the financial year turn to be close to the budget, this actually demonstrates that the organization’s management understand its business and has been successfully driving it in the direction they had planned.

According to (Lucey, 2003) if the actual results diverge wide from the budget, this sends out an out of control signal. For this reason, budget based control means manager’s evaluation according to budgetary goals.

Budgeting benefits and its possible negative effects on attitudes and behaviors of managers on performance are still among the subjects of strategic management control systems that are being researched presently nearly all large businesses reforecast their forecast their activities, as months pass, the actual income achieved and expenses incurred can be compared to the budget and forecast. The development and execution of fiscal action plan, is a major project resource allocation process, reflecting the image of the stakeholder in terms of social value and priorities. This is the process of allocating resource to meet demand. That process should tie the past, present and the future in orderly and ordered way.

Increasing competition is continually pushing businesses towards more efficient processes, and slimmer margins. Highly capitalized industries have to ensure that their resources are used most effectively. Yet at the same time, businesses must adjust to rapidly changing customer requirements and supply chain conditions. The key to achieving operational excellence, therefore, is in the effective and flexible management of resources, and this means optimizing and scheduling people, processes, vehicles, equipment, and materials so that utilization is maximized while business goals are met.

Rowden (1995) define resources management as the process of using a company's resources in the most efficient way possible. These resources can include tangible resources such as goods and equipment, financial resources, and labor resources such as employees. Resource management can include ideas such as making sure one has enough physical resources for one's business, but not an overabundance so that products won't get used, or making sure that people are assigned to tasks that will keep them busy and not have too much downtime.

One of the major constraints to organizational development is lack of adequate and effective managed human resources. It was not surprising therefore when the third national Development Plan of the Osuji 1975 – 1981 as aptly documented by Zahradeen (1980) echoed that successful implementation of a development plan either at organizational level,

or national Level depends not only on the availability of financial and other capital input, but more importantly on the adequacy of well trained, and managed human resource in various occupation.

Ugbana (1986), most of the organizations both public and private are beginning to realize the significance of material management. In most organizational balance sheet, it would be seen that the materials carries the lion share of the total expenditure representing about seventy percent (70%) of the organizational resources while cash represent twenty percent (20%) and other forms of the organizational expenses carried ten (10%). But amazingly it is found that most organizations takes good care of cash by providing it with high security than materials irrespective of its highest share of organizational resources.

This should not be so; materials which have the lion share of the organizational resources should be provided with adequate security and should be managed properly by competent and efficient personnel (Ammer 1996). At the wake of 20th century many organizations had recognized the role of materials and most material activities were carried out by autonomous department such as purchasing, warehousing, stock control, and distribution which at the same time was creating problems.

As development proceeds and the structure and organization of the economy become increasingly complex, the failure of financial management assures increased complexity. As many factors have been identified it will enable the researcher to ask how and why these causes have surfaced. What are the conditions for proper financial management?

It is against this background that the researcher investigates the role of resources management on organizational development.

Statement of the Problem

(Harrington, (2006))argue that resource budgeting should get attention from project managers should pay a great deal of attention because it is one of the most common reasons for project success. The prime focus for the project manager should be on resource budgeting. Many projects fail due to poor resource budgeting and its management.

(KIABEL, 2010, pp. 41-80)) identified that effective resource budgeting significantly affects the project success both in the dimension of time and cost. The study recommends project managers to focus on the resource budgeting. The successful project manager is that understands importance of resource budgeting that is essential to deliver projects on time and cost. But Baca (2015), states that effect of resource budgeting is insignificance in affecting the success of the projects and suggests the managers no to worry about the resource budgeting. Similarly, according to Mochal (2014) resource budgeting cannot be used as a management tool because it has no effect on project success. These indicate that effect of the resource budgeting on project success is inconclusive suggesting further study in this area.

Studies conducted in this area such as Mochal (2014), Kiabel, (2010), and Baca (2015), mainly focused on the planning aspects. But other aspects of the effective resource budgeting depend on communication in the project, coordination of the project activities, evaluation the budget utilization, and motivation of the employees involved in the projects.

The challenge in most organizations has posed a threat on the realization of its development and the achievement of its set objectives. This is as a result of fundamental issues of inadequate and improper acquisition, utilization and maintenance of resource.

The underutilization of Resources in ASKU plc has seriously led the organization into a mess because resource is not properly managed. Mismanagement is another serious problem facing our organization today and has reduced it to nothing as people are no longer kin with their work nor ready to own up to vital Resources in the organization.

Both public and private organizations are usually faced with problems of managing their material resources effectively starting from the point of procurement to stores, issuance to user departments and finally the finished goods. These material resources are scarce and should be utilized properly for proper assimilation.

The factors that contributed or that are responsible for the failure of different companies have different problems. Financial resource management is neglected and has made most organizations to lose a substantial part of their fund through these enterprises because of Fraudulent act, Indiscriminate financing, Poor management, Lack of zealousness and experienced personnel and Inability to utilized its financial potentials etc.

The poor quality and low quantity of product have revealed that the quality of Human and material resource put in place in organizations are not up to expectations and has thereby reduced the company productivity.

Significance of the Study

The significance of the study brings out the need for an organization to constantly develop means of budgeting resources for organizational development.

The importance aspect of the study includes the following:

It will assist managers to know the need for human resource training and development and ensure that the right numbers of skilled/trained manpower are available for employment at the right time for all levels in the organization.

The study, will contribution positively at the rate at which, how resource can be effectively utilized and how it can bring about high productivity in the organization.

Students aspiring to be a material executive in the future see this study as an opportunity to fully investigate into the field of human, material and financial resource management to see the challenges therein.

g.     It also hopes that the study will assist future researchers of resources management and how it can leads to organizational development.

Finally, the researcher believes that this study will contribute for further studies in the area of the study.

Research questions;

1. Is there a significant relationship between Practice of effective resource budgeting and project management in case of ASKU plc?

2. Does effective resource budgeting serve as a tool for project management?

Objective of the Study

1. To determine if there is a significant relationship between effective resource budgeting and project management in case of Asku plc.

2. To ascertain if effective resource budgeting is a tool for project management.

Limitations of the study

The study was limited by two major factors; financial constraint and time. Insufficient fund and time tends to impede the efficiency of the researcher in sourcing for the relevant materials. Inaccessibility to the management of ASKU Plc was also a challenge in the process of data collection.

Scope of the study

The study focuses on effective resource budgeting as a tool for project management scoped to Aquaddis water bottling company (ASKU plc) as a case study.

Geographically it is scoped to Burayu,Addis Ababa and Methodologically to collect the study data, scoped to using structured questionnaire and using Focus group discussion with the key informant and Having a direct involvement on the subject Matters.

Organization of the study

The study will have five chapters. The first chapter was about the introduction of the study that includes background of the study, statement of the problem, research questions, objectives of the study, scope of the study and significance of the study; the second chapter was about literatures reviews which include theoretical literature, empirical literatures and conceptual frame work; the third chapter discusses about methodology of the study which includes description about study area, research design, data source and collection method, sampling techniques and sample size determination, method of data analysis, reliability

and validity analysis, and ethical consideration; the fourth chapter presents result and discussion; and the last chapter, fifth chapter is about conclusion and recommendation.

2.0. Definition of terms

Effectiveness: This refers to the degree to which something is successful in producing a desired result.

Resource: This is something that a country or an organization has and can use to increase its wealth.

Budgeting: This is an estimate, often itemized, of expected income and expense for a given period in the future.

Project Management: This is the application of processes, methods, knowledge, skills and experience to achieve the project objectives.

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PRACTICE OF EFFECTIVE RESOURCE BUDGETING AS A TOOL FOR PROJECT MANAGEMENT (A CASE STUDY OF ASKU PLC [AQUADDIS WATER BOTTLING COMPANY])



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