A Study on How Business Intelligence Affects the Budgeting Process of a Municipal Organization



Situation


Digitalization has been the root of societal changes that have in turn forced businesses to follow suit. The demand for change has led organizations to innovate and revolutionize, including ones in the public sector. Previous research has shown that the public sector tends to use budgets mainly for diagnostic purposes, but that an interactive system is also needed to ensure efficient resource allocation. Budgets are crucial for Swedish municipalities and their budgeting process is facing demand to digitalize, with Business Intelligence emerging as a useful digital tool. Ebba Carlsson and Julia Karlsson (a HandelsConsulting alumnus) therefore saw an opportunity to shed light on how Business Intelligence affects budget interactivity in the public sector.


Method


To achieve the goal of the study, the authors first collected relevant literature, such as Robert Simons’ Levers of Control framework, in the form of different scientific articles and reports. Qualitative interviews were also held with six different respondents from a municipal organization in order to gather empirical data. The theoretical information was then compared to the empirical data.


Findings


Robert Simon's Levers of Control framework recommends a cross-functional system where organizations need an interactive control system and a diagnostic control system. An interactive control system focuses on involving employees further down in the organization and promotes new initiatives and strategies. A diagnostic control system, on the other hand, acts as a feedback system that compares the organization's performance against predetermined goals.


The study found that the use of PowerBI (a Business Intelligence tool from Microsoft) had minimal effect on the cross-functional imbalance of the municipal organization’s budget process. This is in large part due to PowerBI not yet having an impact as it has not properly been incorporated into the organization, with one respondent not even being aware of the tools existence. The study, in accordance with previous literature, confirms that organizations in the public sector mainly use budgets as a diagnostic control system, limiting the interactivity of the budget. The authors suggest that the municipal organization should increase its use of PowerBI in order to increase the interactivity of the budget and in turn obtain balance in the organizations governance. This balance would facilitate future innovation and help the organization keep up with the rapid changes in society.




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