Beyong Budgeting

Question 1

What is beyond budgeting?

Answer 1

Beyond budgeting is an idea that companies need to move beyond budgeting because of the inherent flows in budgeting, especially when used to set contracts.

It is argued that a range of techniques such as rolling forecasts and market related targets can take place of traditional budgeting

Question 2

What does beyond budgeting use

Answer 2

Beyond budgeting uses rolling budgets and sets appropriate KPIs to make sure staff create value for the organisation rather than stick to the existing budget

Question 3

The six principles of beyond budgeting

Answer 3

1) teams making decisions on basis of clear priorities and boundaries
2) high performance climate based on visible and relative success at all levels
3) front line teams with the freedom to take decisions in line with the company’s performance principles and strategies
4) teams given responsibility for value creating systems
5) teams focused on customer principles
6) open and ethical system

Question 4

Advantages of beyond budgeting

Answer 4

More adaptive process than traditional budgeting.

A decentralised process giving leaders use of freedom

Bb use the term budget, they mean the entire performance management process

Question 5

Drawbacks of beyond budgeting

Answer 5

There is a lack of a road map, detailing where a business is and where it wants to go

Budgets also may deeply be graved in an organisation fabric and operations culture

It also may be difficult or impractical for organisations to adopt the culture of decentralisation which successful beyond budgeting depends on

Question 6

Support for traditional budgeting

Answer 6

A 2005 survey by David dugdale found all 40 companies asked used budgets, Both for financial and non and said they were useful for planning, control and performance. They argued that budgets were indispensable but did have problems with time constraints

Question 7

Other support for traditional budgeting

Answer 7

Budgets add value to the business through a level of stability that cannot be achieved by beyond budgeting

Budgeting is also so deeply ingrained within he organisations company culture. Budgets are often so entitled to the business, and only thing that brings together all aspects of the business.

It’s regarded that banks and other financial institutions are more appropriate candidates for decentrasiation. For example Norman macintosh observed that branch managers of transamerica finance corporation has a great deal of freedom to run operations according to standard operating procedures

Question 8

Concluding beyond budgeting - the evolution of budgets

Answer 8

In dugdales survey it discovered that budgets have been evolving over the last 20 years. Research claims 60% of organisations have claimed to be improving the budgeting process. Like increases use of forecasting has led to more forward looking budgets which are better linked to strategic planning

Also new technology has changed the way data is collected and stored in organisations. Enterprise wide collection of information is another reason why the budgeting process has been able to evolve