Budgets (7) Flashcards
Traditional budgeting process (goals)
Short-term focus. Fixed annual targets drive short-term actions with a view of meeting annual targets
Beyond budgeting process (goals)
Longer-term focus such as KPIs on sustained competitive success
Traditional budgeting process (Rewards)
Individual departments have to meet their own targets to gain rewards
Beyond budgeting process (Rewards)
Organisation is viewed as one team to emphasis learning and continual innovation
Traditional budgeting process (Plans)
Plans are difficult to change even if plans become unrealistic due to “predict and control”
Beyond budgeting process (Plans)
Future is unpredictable, so plans are continuously updated
Traditional budgeting process (Resources)
Process of allocating resources to operating units is centralised. Resources allocated to producys instead of new ideas as head offices are risk adverse
Beyond budgeting process (Resources)
Resources are allocated to strategic initiatives and are available on demand
Traditional budgeting process (Co-ordination)
Leaders attempt to coordinate plans by linking one functional budget to another. Often fails to meet customer needs as it’s centralised
Beyond budgeting process (Co-ordination)
Dynamic linking of customer demands to provide fast, seamless solutions that meet customer needs
Traditional budgeting process (Controls)
Performance reports are based on financial indicators. Which don’t give insight into root cause of the problem
Beyond budgeting process (Controls)
Strategic decisions are based on multi-level info, giving insight into future and past performance
Advantages of beyond budgeting?
Encourages innovation
Increases motivation
Allows faster responses to threats and opportunities
Disadvantages of beyond budgeting?
May be resistance to change from managers to employees to adopt such a culture
Needs a plan, even if there are a lot of uncertainties in the future
How may past data be used in preparation ob budgetsa?
As a starting point for preparation of budgets but other info form wide variety of sources is used