Reference no: EM132735229

Traditional budgeting methods are becoming outdated and counter-productive. The idea that departments will needlessly spend in the final months of the year to ensure their budget is not cut the following is unreasonable. Beyond Budgeting looks to rectify these problems by abandoning traditional methods. The two main drivers for this are;

1. A more adaptive set of management processes
2. A highly decentralized organization

• Beyond Budgeting empowers management by giving them the freedom to achieve their goals without the need of a rigid set of budgeted number's Instead, front line management are given goals that are in line with shareholder value and the bigger picture.

• As one of the main criticisms of traditional budgeting methods is the fact it's too short-term in its thinking. These goals are measured using a set of KPI's, industry benchmarks, customer satisfaction and revenue or market capitalization.

Hope and Fraser identified 6 shared common principles that should be used by all companies who want to adopt a Beyond Budgeting technique:

• A governance framework based on clear priorities and boundaries.
• A high performance climate based on visible and relative success at all levels.
• Front line teams with a freedom to take decisions in line with the company's governance principles and strategic goals.
• Teams given responsibility for value creating systems.
• Teams focuses on customer outcomes.
• Open and ethical information systems.

1. If applied correctly, the beyond budgeting process rewards the high performers within the company and not just the skilled budget negotiators. Other key benefits include accountability and ownership by empowering the front line teams to make decisions. And, of course, there is less waste as managers are encouraged to work towards medium and long term strategic goals rather than traditional annual budgets that produce unnecessary spend.

REQUIRED:

Question 1: Debate the impact of Beyond Budgeting, It should include an analysis of its technical implementation and overall impact towards the firm's business model and strategy.

Question 2: Determine the behavioral changes expected from the firm's personnel in line with the changes explained in Question 1.