Academic journal article Academy of Educational Leadership Journal

Multidimensional Budgeting: A Tool for Transformational Leadership

Academic journal article Academy of Educational Leadership Journal

Multidimensional Budgeting: A Tool for Transformational Leadership

Article excerpt


A number of tools have become available to managers in recent years that can help them do a better job of planning and controlling. Many of these tools are based in computer technologies that make reporting, summarization, and analysis of operating results easier (Johnson & Kaplan, 1987; McKinnon & Bruns, 1992). In some cases, these technologies and the techniques they enable have helped managers to do things that were not possible before (Atre & Storer, 1995; Borthick, 1992, 1993; Elliot, 1996).

One of these enabling technologies is online analytical processing (OLAP) software (Callaway, 1995; Fairhead, 1995; Ricciute, 1994). The use of OLAP software enables managers to compile and analyze their planned and actual numeric results in a variety of ways. In the past, managers were at the mercy of finance and accounting personnel who prepared budgets and reports as they saw fit (Borthick, 1992). OLAP software allows managers to independently create and use budgets that compile operating plans and results on multiple dimensions (Schmidt, 1992).

The new multidimensional budgeting techniques that OLAP software enables allow managers to use budgeting in new ways. Traditionally, the budget was the tool of the transactional manager; the person who did not lead subordinates into new areas of endeavor, but rather maintained the status quo. These managers were charged with creating and maintaining stability in the organization (Barker, 1997). Existing budgetary tools provided transactional managers everything they needed to manage routine activities, implement incremental change, and to plan, organize, staff, direct, and control in a stable environment. Often, budgets incorporated standards for prices, quantities, labor rates, and hours that had been developed over years of time-and-motion study and product engineering. Today's product and service life cycles, which have become ever shorter, have destroyed any hope of generating meaningful benchmarks using such techniques.

Transformational leaders need tools that support them as they navigate the shoals of strategic change. Strategic change is frequently non-routine, not incremental, discontinuous, and anything but stable. To lead people into new structures, new patterns of action, and even new belief systems, a manager needs tools that support information flow in the midst of these changes. Multidimensional budgeting provides one such tool for transformational leaders.


Burns (1978) argued that we knew far too little about leadership. He offered as a remedy his idea that leadership is more than just the traits and observable behaviors of leaders. He argued that leadership was a process of mobilizing persons and resources to realize goals. He acknowledged that these goals might be mutual or independently held, and that the mobilization process generally occurred in an environment fraught with competition and conflict. He also characterized leadership as a reciprocal process.

Bass (1985, 1990) and Bass and Avolio (1993, 1994) have taken Burns' ideas and distilled them into the concept of transformational leadership. Although critics have taken Bass and Avolio to task for a variety of issues (Barker, 1997; Rost, 1991), transformational leadership has become widely discussed and implemented as an alternative to traditional, or transactional, leadership models (Sashkin & Fulmer, 1997; Tichy & Devanna, 1990).

Wright and Taylor (1994) note that an essential difference between the two types of leadership models is that transactional leaders tend to use closed and leading questions in their interactions with subordinates; transformational leaders use a higher proportion of open and reflective questions in their interactions with subordinates. Indeed, most transformational leaders would even use different terminology for referring to subordinates, preferring terms such as "collaborators. …

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