Beyond Budgeting

Question 1

Traditional budgeting (TB) has long been central

Answer 1

Traditional budgeting (TB) has long been central to organizational management, but its relevance is increasingly questioned due to its rigidity, inefficiency, and inability to meet the needs of fast-paced and dynamic environments.

Question 2

Beyond Budgeting (BB) has emerged as an alternative

Answer 2

Beyond Budgeting (BB) has emerged as an alternative approach, promising greater flexibility, decentralization, and responsiveness.

Question 3

This essay evaluates the

Answer 3

This essay evaluates the criticisms of TB and assesses how BB addresses these issues, referencing academic and practitioner research.

Question 4

TB is criticized for

Answer 4

TB is criticized for its rigidity and focus on annual cycles, which often fail to adapt to changing market conditions.

Question 5

Ekholm and Wallin (2000) argue that TB (const. reson. rather than innov.)

Answer 5

Ekholm and Wallin (2000) argue that TB constrain organizational responsiveness and promote incremental thinking rather than innovation.

Question 6

These budgets are also time-consuming (assumpt. guesswork)

Answer 6

These budgets are also time-consuming to prepare and update, often based on assumptions and guesswork that may lack relevance in dynamic environments.

Question 7

Wallander (1999) goes further, (“unnecessary evil”)

Answer 7

Wallander (1999) goes further, deeming budgets as an “unnecessary evil,” as they focus on cost reduction rather than value creation.

Question 8

Another major criticism is that TB (gaming manip.) (Hope & Fraser, 2003)

Answer 8

Another major criticism is that TB fosters perverse behaviours, such as gaming and manipulation of targets (Hope & Fraser, 2003).

Question 9

Managers may pad budgets to

Answer 9

Managers may pad budgets to secure easier targets or spend unnecessarily to justify next year’s allocations.

Question 10

Armstrong (2011) highlights the human cost (managerial bullying, stress demotiv.)

Answer 10

Armstrong (2011) highlights the human cost of these systems, observing how budget controls can become tools of managerial bullying, creating stress and demotivation among employees.

Question 11

BB offers a progressive framework

Answer 11

BB offers a progressive framework to overcome the limitations of TB.

Question 12

Hope and Fraser (2000) emphasize its two core (adaptive + decentralised)

Answer 12

Hope and Fraser (2000) emphasize its two core principles: adaptive management processes and decentralized decision-making.

Question 13

Instead of rigid annual budgets, (employs rolling forecasts flexible targets, adapt quickly)

Answer 13

Instead of rigid annual budgets, BB employs rolling forecasts and flexible targets, enabling firms to adapt quickly to changing circumstances.

Question 14

This model also emphasizes decentralization, empowering (real-time info)

Answer 14

This model also emphasizes decentralization, empowering local managers to make decisions based on real-time information rather than adhering to centrally determined budgets.

Question 15

Hope and Fraser (2003) illustrate this through the case of Svenska Handelsbanken, (delegating decision-making to local branches & using)

Answer 15

Hope and Fraser (2003) illustrate this through the case of Svenska Handelsbanken, which operates without TB and achieves superior performance by delegating decision-making to local branches and using external benchmarks for evaluation.

Question 16

BB encourages firms to eval. performance (competitors over internal targets)

Answer 16

BB encourages firms to evaluate performance relative to competitors and industry standards, rather than fixed internal targets.

Question 17

This approach aligns performance (innovation & customer focus)

Answer 17

This approach aligns performance measures with strategic goals, fostering innovation and customer focus.

Question 18

As Hope and Fraser (2003) argue, team-based rewards and accountability drive

Answer 18

As Hope and Fraser (2003) argue, team-based rewards and accountability drive motivation more effectively than individual incentives tied to fixed budgets.

Question 19

Despite its advantages, BB is not

Answer 19

Despite its advantages, BB is not universally applicable.

Question 20

Libby and Lindsay (2010) found that many (TB due to its familiarity & role in long-term plan. & control)

Answer 20

Libby and Lindsay (2010) found that many firms continue to rely on TB due to its familiarity and role in long-term planning and control.

Question 21

Dugdale and Lyne (2006) suggest that TB remains (managers valuing their role in coord. activities & providing a)

Answer 21

Dugdale and Lyne (2006) suggest that TB remains embedded in organizational culture, with managers valuing their role in coordinating activities and providing a sense of stability.

Question 22

Moreover, implementing BB requires (cultural shifts toward trust & empowerment)

Answer 22

Moreover, implementing BB requires significant organizational change, including cultural shifts toward trust and empowerment.

Question 23

Wallander (1999) notes that such changes (not suit all, those with hierarchical structures or conservative cultures)

Answer 23

Wallander (1999) notes that such changes may not suit all firms, particularly those with hierarchical structures or conservative cultures.

Question 24

In conclusion, while TB is increasingly criticized (BB presents a viable alternative for)

Answer 24

In conclusion, while TB is increasingly criticized for its inefficiencies and behavioural drawbacks, BB presents a viable alternative for firms operating in dynamic and competitive environments.

Question 25

BB addresses many shortcomings (adoption depends on)

Answer 25

BB addresses many shortcomings of TB, but its adoption depends on organizational context.

Question 26

Future research and practice should explore (integrate the strengths of)

Answer 26

Future research and practice should explore hybrid models that integrate the strengths of both approaches.