Beyond Budgeting

Beyond Budgeting

  • Submitted By: nicksos
  • Date Submitted: 01/05/2014 5:12 PM
  • Category: Biographies
  • Words: 4648
  • Page: 19
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Budgeting — an
A European idea to drop budgeting altogether is starting to find receptive ears in North America. In this two-part series, we consider what’s wrong with the present model and how some are suggesting we fix it.
By Theresa Libby and R. Murray Lindsay, CMA

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n a very short period, the budget has gone from playing centre stage in most organizations’ control systems to being the subject of considerable criticism — to the extent that some people are calling budgeting “broken,” “a thing of the past” or an “unnecessary evil.” Moreover, recent surveys corroborate such criticism by reporting a growing dissatisfaction among organizations with their budgeting systems. The case against traditional budgeting has been systematically investigated and reported upon by a European think tank known as the Beyond Budgeting Roundtable (BBRT) — a program of the Consortium for Advanced Manufacturing International (Europe). They argue that firms today need to be more flexible and responsive to deal with unpredictable change, hyper-competition, and increasingly fickle customers. They argue that this requires more effective strategic management and the replacement of the command and control design of most organizations with the dispersion of more authority to the front line. The BBRT’s movement is gaining momentum. Several European companies including Handelsbanken, Volvo, Ericsson, Boots, SKF, Borealis and Schlumberger have either abandoned budgeting or are in the process of doing so. Moreover, the BBRT now has North American companies in
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their sights and have started pushing their message to these companies’ executives. This is quite a turn of events for such a cherished practice. It’s not the first time the budgeting process has been criticized. But there’s a big difference this time. In the past, criticisms were leveled at poor practices within the budgeting tradition. Improvements could be made or problems avoided. The BBRT’s message is...

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