About Beyond Budgeting

Concepts

Principles

Benefits

What others think

About Beyond Budgeting - Concepts

A number of organizations have recognized the damage done by budgeting and rejected the reliance on obsolete data and fixed plans. Organizations that have gone beyond budgeting represent widely differing industries and vary in size. They have all found that their performance has improved once the budgeting process was abandoned in favour of more relative and adaptive means of planning, evaluating performance and control. They report saving considerable amounts of time that used to be spent on budgeting.

From fixed budgets to adaptive processes

Compared with the traditional management model, beyond budgeting has two fundamental differences. First, it is a more adaptive way of managing. In place of fixed annual plans and budgets that tie managers to predetermined actions, targets are reviewed regularly and based on stretch goals linked to performance against world-class benchmarks, peers, competitors and prior periods.

From centralized hierarchies to devolved networks

Second, the "beyond budgeting" model enables a more decentralized way of managing. In place of the traditional hierarchy and centralized leadership, it enables decision-making and performance accountability to be devolved to line managers and creates a self-managed working environment and a culture of personal responsibility. This leads to increased motivation, higher productivity and better customer service.

Individually these two main features can produce significant benefits, but in combination they can meet a leadership vision that has, up until now, been strong on vision but weak on delivery.

Because it is a coherent model in which all of its components work in harmony, it can produce outstanding and sustained success. This success is driven by four direct value drivers: innovative strategies, low costs, loyal and profitable customers, and ethical reporting. However, these drivers will be ineffective unless front line people have the scope, knowledge and power to deliver. The result is an organization that is lean, adaptive and ethical and that has the potential to remain at the top of its peer group league table.

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