The beyond budgeting movement in business management promotes a lesser emphasis on top-down command-and-control and instead places a greater focus on front-line decision-making, decentralized and highly adaptive localized management units, client satisfaction, transparency and the fostering of common goals throughout the organization. Strict adherence to a traditional annual budget plan is viewed as a potential liability because it can distract or prohibit managers from being effectively responsive to changing developments in a highly dynamic environment. A primary goal is to focus on increasing value to the customer rather than hitting number targets on a budget plan.Continue Reading
The beyond budgeting principals encourage a holistic and flexible approach to directing an organization's activities rather than following a set of rules and regulations. Core values, teamwork, trust and accountability are stressed, and focusing on short-term profit margin goals is cautioned against.
In those companies following the beyond budgeting principals, employee rewards are based on overall performance rather than on how often budgetary targets are achieved. When budgets are planned, they reflect customer needs rather than internal expectations, and they can also be revised accordingly to meet the changing demands of the marketplace.
The beyond budgeting movement is critical of annual budgets because of their inflexibility, their potential to distract managers from focusing on customers and the apprehension that can accompany innovative thinking that may fall outside of the budget's constraints. Annual budgets are also viewed critically because they can become obsolete way before the end of the fiscal year, and then remain unsuited to the needs of a rapidly changing environment.Learn more about Accounting