Developing a budgetary control framework for a multinational company using Industry 4.0 technologies

Abstract

Multinational companies form part of our day-to-day existence. The increase in these companies is leading to people of different cultures having to work together to ensure that the company is a success. In the past, multinational companies were unable to ensure that growth is being achieved in the best way possible. Consequently, this has led to goal divergence between employees and management, weak communication channels and weak internal governance processes. To be able to ensure that multinationals reach its full potential, the internal governance process has to be improved. Additionally, when corporate employees feel included and part of the decision-making in the company, it will possibly lead to goal convergence instead of goal divergence. This strategy is referred to as the stewardship theory, and depicts management and employees as working together towards achievement of the strategic goals of the company. An activity that should lead to goal convergence between employees and management, is budgeting. Due to the structure of multinational companies, however, this can lead to goal divergence. This goal divergence could harm the company by limiting its progress towards completion of projects, leading to overspending, both of which reflect poor internal governance. A case study company within the mining sector was selected for this study. Within this sector – similar to other sectors – cost savings are a priority area to ensure sustainability. It was therefore necessary to develop an improved method of budgeting. New technologies were recently designed as part of the fourth industrial revolution. These technologies – termed Industry 4.0 technologies – can possibly aid in solving the budgeting problem in the selected multinational company selected for this case study. To determine whether this would be possible, an action design research approach was followed. Action design research is a research method used to solve practical problems (practice inspired) by using a theoretical framework (theory ingrained). An artefact is designed and then tested by going through a number of iterations so that it can become clear how this artefact can aid in solving the problem identified in practice. In this study an artefact was developed through conducting both a literature and an empirical study. The aim of the literature study was to firstly identify the best method and guidelines for budgeting. Secondly, the literature study examined the different Industry 4.0 technologies to determine what the possible benefits and drawbacks of each technology are. After the literature study has been done, a first iteration of a possible Industry 4.0 budgeting framework was designed. The budgeting framework was then refined by conducting semi-structured interviews with seven manager-level employees of the selected multinational company. The aim was to understand the corporate environment, as well as the challenges and needs of the current budgeting system so that an appropriate budgeting framework, using Industry 4.0 technologies, could be designed. This study concluded that it was possible to use Industry 4.0 technologies, such as big data, simulation and cyber physical systems, to design a budgeting framework in order to improve the internal governance of the company and which could lead to employees and managers working towards the same strategic goals.