Reference no: EM132971640

Mountkilo plc is a successful hotel chain with hotels located throughout the world. It is somewhat unusual in that it both owns and manages all of its hotels. The Chief Executive believes that its success is to a large extent due to adoption of a Beyond Budgeting approach. He explained that, for example, each hotel manager now produces rolling budgets on a monthly basis that provide a high level of detail on their planned income and expenditure and the managers also have a high level of decision making authority in order to ensure that guests are satisfied.

• Property management and marketing are both controlled centrally and the company has spent heavily on advertising to maintain its brand recognition and on refurbishing its hotels on a regular basis. It also spends a significant amount on training its staff in a central location each year to ensure that, no matter which Mountkilo hotel you check in to, the guest experience is identical.

• Hotel managers are assessed on a range of key performance indicators (KPIs) including measures that address financial performance, customer satisfaction and business processes. Targets are set at the start of each year and if managers exceed those targets at their hotel then they are awarded a bonus.

• If a hotel manager believes that extra spending is required in their hotel, for example because of increased local competition or a failure of a key piece of equipment, then they can request this via their monthly rolling budget submission. This is then reviewed for approval by a more senior area manager.

Required

Problem a) Discuss to what extent it can be argued that Mountkilo has implemented Beyond Budgeting as proposed by Hope and Fraser (2003).

Problem b) Outline the main reasons identified by Libby and Lindsay (2010) that help explain why budgeting is still widely used and briefly discuss whether there are any problem or limitations with their research.