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Beyond Budgeting. ARAY Julia NAUMOVA Anna Rogoza Olesya I. Baranov. - PowerPoint PPT Presentation
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Beyond Budgeting
ARAY Julia NAUMOVA Anna
Rogoza Olesya
I. Baranov
Beyond budgeting is….a positive idea that uses the
abandonment of budgeting as a trigger for improving the entire management control
process.
Extract from the Foreword by Dr. Charles T.Homgren, Professor of Accounting, Stanford University.
So-called model Beyond Budgeting Model has been
developed by the organization with same name Beyond Budgeting
Roundtable, abbr. BBRT, based the Great Britain in 1998. It includes 60 companies from the Great Britain,
the Europe and the USA.
The Beyond Budgeting Model is designed to:
overcome traditional barriers
create a flexible, adaptable organization
That gives to local managers the self-confidence and freedom to think differently, make decisions rapidly, and collaborate on innovative projects with colleagues in multifunctional teams both within company and across its borders.
Twelve principles of BB
The Beyond Budgeting Model is a new approach to budgeting, and also a holistic approach to strategy management, business planning, target setting, rolling and event-driven forecasting, and business-performance management based on financial and non-financial key performance indicators.
Traditional versus Beyond Budgeting
Traditional Budgeting
Pro:• Part of control system• Fixed financial targets• Financial incentives• Annual plans- the best
ways to max market opportunities
• Leaders are the best placed in resource allocation
Contra:• Budgets lack
sufficient strategic orientation
• Budgets ignore the turbulence of markets
• Budgets lead to inappropriate (unethical) management behavior
Relations among different budgeting concepts
Beyond Budgeting
Advanced Budgeting
Better Budgeting
Traditional Budgeting
Increasing radical changes
Potential number of users
Beyond budgeting Pro:
• Faster response • Innovative strategies• Lower costs • More loyal
customers
Contra:• Problems relating to its
small circle of potential users
• The difficulty of managing without budgets
• Not justify the associated high costs
• Fear of Change • The lack of empirical
evidence concerning its use
Robin Fraser, Jeremy Hope. Beyond Budgeting(Hardcover, 2003)
Beyonв Budgeting: boon or boondoggle?, Robert C. Rickards Investment Management and Financial Innovations, Volume 3, Issue 2, 2006 62
Beyond Budgeting or Better Budgeting?, Bytheresalibby, Ca. and R. Murraylindsay, Strategic Finance, 2007
Beyond Budgeting: questions and answers, Jeremy Hope, Robin Fraser, 2001
www.bbrt.org
References
To make planning a constant and overall process Constant
adaptiveprocessTo coordinate
actions according to the
demand
√ to base goals on the EXTERNAL
performance indicators;√ to set HEIGHTENED goals
To coordinate reward with the
RETROSPECTIVEevaluation
To base controlon the effective
managerial principlesand a set of the
performance indicators To provide an
accessibility of theresources needed
Svenska HendelsbankenDeutsche Bank
Southwest airlinesBorealis
Ahlsell Rhodia
Toyota Volvo
IKEA
goals
key performance indicators
in comparison with the market indicators • disposal of the influence of the uncontrollable
input factors• measurement of the managerial
improvements
Managers: - reward is based on KPI; - more freedom in actions
(and more responsibilities)
• Enterprise Resource Planning: fluent reaction to the demand(the center – operations, not departments & functions)
• Forecasts: - are made according to the results of previous quarters - separated from the evaluation of efficiency and control- based on the moving average
Cost center
Current month
The same month last year
Cumulative total for the current year
Moving average for 12 months
% changes of the moving average for the last year
Internal reporting of Borealis