Running Head: CASE STUDY: SKANSKA INTERNATIONAL - BUREAUCRATIC

AND BUDGETARY CONTROLS

1

Case Study: Skanska International - Bureaucratic and Budgetary

Controls Janet Hightower

University of the Rockies

Case Study: Skanska International - Bureaucratic and Budgetary Controls 2

Introduction

In this paper there gives vital information and examples of

budgetary, including the challenges of adhering to a budget and

the benefits of implementing a budget. Understanding

bureaucratic controls that include performance standards by

establishing formal rules, standards, and legitimate authority

where tasks are set and employees work independently.

Highlighting Skanska International, benchmarking performance in

areas of market segment, revenue, income, return on equity and

capital (Appendixes B-D). Including the weakness and strengths

of benchmarking. Without budgetary controls organizations would

not have managerial direction together with essential operating

information for success, therefore the organization will fail

due to lacking financial planning and budgetary control.

Analysis - Part A

Case Study: Skanska International - Bureaucratic and Budgetary Controls 3

The benefits of budgetary consist of management control

with the ability to project the sales and income of the

corporation. There are many areas of budgetary which include

areas of sales (monthly, area, and products), production

(machines, materials and quantities), cost (expenses without

revenue per department and can be fixed or independent), cash

(receipts and expenditures of working capital available),

capital (fixed asset cost investments) and the master budget

(major business activities). Budgets are basic needs for an

organization, it is important to have managers meet to

determine if the organization is meeting the budgets

objectives. After approval of a new budget the organization can

begin implementation into all departments for the new budget.

There are dangers of not having a budget where employees

can ask for larger amounts of money than needed or too low or

request for money. When asking for lower amounts estimating the

budget for reasons of approval. Some arguments can occur during

a budget session with superiors by trying to achieve a monetary

request by attempting to get slack which can affect the

Case Study: Skanska International - Bureaucratic and Budgetary Controls 4

motivation of the organization. Overall there can be selfish

desires of the superiors, managers and employees as each group

is concerned about their own performances and disregards about

the performances of the organization.

Some of the common mistakes in budgeting are basic

ineffective control systems with failure to provide standards,

inadequate information to employees, employees do not approve

the budget, no communication, and single approaches. Inside

effective control systems there needs to be performance

standards by measuring progress of the budget. Often employees

resist a budget due to too many measures, with satisfactory

performance measures employees are able to understand and

accept the budget. By providing feedback communication improves

as well as motivation as employees can achieve the performance

standards and improve self-control which gives them more

freedom to work independently. With a multiple approach

employees can use control systems with financial and

nonfinancial performance goals in preliminary, feedback,

concurrent control.

Case Study: Skanska International - Bureaucratic and Budgetary Controls 5

Analysis

Part B

Benchmarking is the control process of comparing the

practices and technologies of other companies to your

organization’s practices. According to Kerfoot (2005)

organizations need to stop benchmarking against the median or

average, which she calls mediocrity, and wants organizations to

accept a challenge for an error free environment is possible.

On the other hand benchmarking gives an organization huge

benefits by being able to compare like organizations to have a

basis for change. According to Skanska International (2014a) a

viable competitor in the marketplace is Fluor Corporation

located in the United States and an ideal organization to

benchmark (Skanska International (2014a). Fluor Corporation is

similar to Skanska, in the same industry with similar financial

set points and currently benchmarked providing a validation of

efficacy.

APPENDIXES- Part C

Appendix A: Example Balance sheet

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APPENDIX A

2009 2010 2011 2012 2013

Assets SEK M SEK M SEK M SEK M SEK M

Cash 87 9 65 117 177

Account Receivables (AR)

4 6 3 6 9

Inventory 32 36 22 65 33

Notes Receivables (NR)

64 56 65 44 33

Fixed Assets SEK M SEK M SEK M SEK M SEK M

Land 61 88 124 140 199

Building 242 442 553 553 553

Machinery/Equipment 43 23 23 43 55

Furniture/Fixtures 3.6 3.3 4.4 4.5 5.0

Leasehold improvements

244 322 322 553 443

Intangibles SEK M SEK M SEK M SEK M SEK M

Research/Development 43 22 54 33 22

Patents 2 - 4 - -

Market research 2 1.4 3.3 - -

Goodwill 3.6 3.3 4.0 3.4 3

Organizational expense

15 12 14 12 11

Other Assets - - - - -

Case Study: Skanska International - Bureaucratic and Budgetary Controls 7

Total Assets 846.2M 1221M 1170.7M 1573.9M 1543M

Liabilities SEK M SEK M SEK M SEK M SEK M

Accounts Payable (A/P)

120 100 98 114 105

Accrued expenses - - - - -

Notes Payable (N/P) 45 34 22 84 22

Current Long-Term Debt (LTD)

533 523 344 643 432

Non-Current Liabilities

2 2.3 9.5 3.4 4.2

Total Liabilities 700M 659.3 473.5 844.4 563.2

Difference 146.2M 561.7M 697.2M 729.5M 979.8M

Figure 1 – Balance Sheet

The balance sheet is a financial picture of an organization

with a specific time frame (Small Business Administration,

2014).

Appendix B: Skanska Balance Sheet

APPENDIX B

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Figure 2 – Skanska Balance Sheet (Skanska International, 2014b)

Case Study: Skanska International - Bureaucratic and Budgetary Controls 9

The balance sheet includes assets, liabilities and equity

for stockholders (Bateman & Snell, 2013).

Appendix C: Profit and Loss statement

APPENDIX C

Figure 3 – Skanska Profit and Loss statement (Skanska International, 2014b)

Case Study: Skanska International - Bureaucratic and Budgetary Controls 10

Budgetary control includes profit and loss statement which

can be used for goals where performance can be measured

against the goals or standards (Bateman & Snell, 2013).

Appendix D: Skanska International Financial Ratios Statement

APPENDIX D

Figure 1 – Skanska Example Financial Ratio Statement –

Construction (Skanska International, 2014b)

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Figure 2– Skanska Example Financial Ratio Statement –

Residential Development (Skanska International, 2014b)

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Figure 3 – Skanska Example Financial Ratio Statement –

Commercial Property Development (Skanska International,

2014b)

Figure 4 – Skanska Example Financial Ratio Statement –

Infrastructure Development (Skanska International, 2014b)

The financial ratio statement can help organizations find

possible strengths and weaknesses within the operations,

additionally checking the total performance to use specific

financial ratios (Bateman & Snell, 2013).

Summary

Case Study: Skanska International - Bureaucratic and Budgetary Controls 13

When comparing the financials factors of Skanska

International to Fluor Corporation, Fluor Corporation was near

certain trends similar to Skanska, therefore they were a good

choice for benchmarking. The Skanska International balance

sheet, Skanska International profit and loss sheet, Skanska

International loss statement, and Skanska International

financial ratios statement are all public information which can

be available to all stakeholders. With budgetary controls

Skanska International can and will exceed the success they have

achieve worldwide setting them apart from the competition. With

a stronghold Skanska International can use benchmarking gaining

benefits into understanding the competition enabling them to

set goals and gaining a basis of the marketplace.

Conclusion

With the concepts contained in the paper an organization

can get some insights and understanding of bureaucratic and

budgetary control. The impressive Appendixes display success

of Skanska International revenues increasing by 3 percent with

goals to increase to 7 percent (SEK 136.3 billion), Skanska

Case Study: Skanska International - Bureaucratic and Budgetary Controls 14

International (2014b) With budgetary controls Skanska

International has an edge on the competition for leveraging

success in the construction marketplace, success comes by

financial planning and budgetary control which is an asset to

the organizations worldwide.

References

Bateman, T. S. & Snell, S. A. (2013). Management: Leading and

collaborating in the competitive world (10th ed.). New York: McGraw-

Hill/Irwin

Kerfoot, K. (2005). Expertise isn't the only answer to

leadership in safety. Nursing Economics, 23(2), 100-2.

Retrieved from

http://search.proquest.com/docview/236934952?

accountid=39364

Skanska International. (2014a). Skanska. Retrieved November 24,

2014, from Skanska/

Investors/Shareholder-Information/Competitors

http://www.group.skanska.com/en/investors/shareholder-

information/competitors/

Case Study: Skanska International - Bureaucratic and Budgetary Controls 15

Skanska International. (2014b, February 7). Year-end report,

January - December 2013 [Press release]. Retrieved from

http://www.group.skanska.com/cdn-cf23d2b41755ea/Global/Inve

stors/Reports/2013/Skanska-q4-2013-EN.pdf

Small Business Administration. (2014). Finance Your Business- Preparing

Financial Statements [Article]. Retrieved November 24, 2014,

from sba.gov website:

https://www.sba.gov/content/financial-statements#Equity