Erhvervskonomiske institut Vejleder:
Margit Malmmose Peyton
Beyond Budgeting vs. den
En vurdering af modellernes egnethed
Handelshjskolen i rhus, rhus Universitet
1. juni 2010 i
For decades budgeting has been the dominant management tool in companies of all sizes and trades.
Nevertheless there has been an increasing dissatisfaction with the budgeting practices that was
developed in the 1920s where things were characterised by a high degree of predictability and
stability. Today we have an environment where the competitive factor between companies have
grown, it is characterised by increasingly complexity and dynamics that makes the future more
unpredictable. This new environment gives new challenges to the way to control a business and the
management tool that the company uses. Event do the environment has changed the budget and
Budgeting process has not changed, this has lead to the massive criticism. The critic comes from
both theoreticians and practitioners, that states that the traditional budgeting has a lot of flaws. As a
response to the criticism there have been developed different helping tools and an alternative model
for managing and controlling a business. This alternative model is the Beyond Budgeting model,
that has been developed by the Jeremy Hope and Robin Fraser, the cofounders of the Beyond
Budgeting Round Table.
There are thus very different opinions on how a company should be managed and controlled, and it
is this that has been the motivation for writing this thesis. The focus of this thesis and study is
therefore to determine whether Beyond Budgeting is better suited for managing and controlling a
company then traditional budgeting is. To clarify this statement there will be look at to hypothesis,
first it will be examined if traditional budgeting has outplayed its role as a management tool, next it
will be examined if Beyond Budgeting can be seen as an independent alternative to traditional
Budgeting. Furthermore, to examine if Beyond Budgeting is a better model for managing and
controlling a company, there will be made an analysis of the two models to examine their suitability
and efficiency as management models.
All this will be done through a theoretical study of the two models.
Chapter 2 of the thesis gives a review of what traditional budgeting is, the different objectives,
components and processes of running and using traditional budgeting in a company. Here it was
found that traditional budgeting has a big role in company management, where it fulfil a range of
purposes in connection with economic- and company management. Furthermore it was found that
traditional budgeting had a structured and top-down approach to managing a company, it consists of
1. juni 2010 ii
a structured budgeting process that through top-down management makes sure that all employees
knows and act according to the overall goal of the company.
Furthermore the main points of criticism of the traditional budgeting model are examined and
reflected upon. There were found three main point of criticism, and event do the criticism of
traditional budgeting is found to be justified, it was also found that the critique were to one sided
and not consistent with the through. Therefore it is judged that critique is too harsh but to some
degree through. Furthermore it was found, that traditional budgeting still fulfils some central
elements and objectives for managing a company, that a company cannot run without, and therefore
still is the most widely used model for managing a company.
On the basis of all this it cannot be concluded that traditional budgeting has outplayed its role as a
management tool. Traditional budgeting is the part that controls the companies and has been doing
it for years, and therefore still is widely used. It can also be concluded that, the development in the
environment and the increasing criticism, makes it evident that there has to be look for alternatives
to or improvements for the traditional budgeting. Keeping the original purposes and objectives of a
management tool for managing and controlling a company in mine.
Chapter 3 gives a review of Beyond Budgeting, the structure, different parts and principles and the
main points of criticism. Beyond Budgeting have raised from the problems and criticism of
traditional Budgeting and attempts to overcome these by setting up an alternative model for
managing and controlling a company. Beyond Budgeting is a continuous model that consists of two
steps, which individually consist of 6 different principles, which should help the company, be more
adaptive and decentralised. The first step is the six principals of managing with adaptive processes.
Which by changing the central process of the company, seeks to make the company more dynamic
When this has been accomplished the second step is to become a more decentralised company by
implementing the six principals of radical decentralization. Which by changing the structure of the
company and the way things are done, seeks to make the company decentralized and event more
dynamic and adaptive.
1. juni 2010 iii
Event do Beyond Budgeting is adjusted for and make the companies more tailored for the
conditions that todays companies have to operate under the model have some flaws. First the
foundation for the theory is considered slim, and the vague descriptions make it difficult to
implement and use. Furthermore are Hope and Frasers sharp division of the two ways of looking at
managing and controlling a company, not so divided as they indicate. In addition it is not found that
the traditional budgeting model is as obsolete as Hope and Fraser indicates.
Another problem that was found was that there is no structure for the management of the financial
issues of the company, which is seen as a big flaw. Furthermore there was found a problem with
gaming in connection with the companies KPIs as evaluation basis. Besides this, is Beyond
Budgeting seen as an expensive and resource demanding model to implement and use the first many
In order to be seen as a sufficient alternative to traditional budgeting, Beyond Budgeting has to at
least fulfil the purposes that traditional budgeting has in connection with economic- and company
management. Here it was found that Beyond Budgeting fulfil most but not all purposes, and on the
basis of this it can be concluded that Beyond Budgeting not can be seen as a sufficient alternative to
In Chapter 4 there is performed an analyses of the two models to see if they fulfil the basic
management functions and thereby can be seen as suitable and effective management models for
running a company. Through the analysis it was found that traditional budgeting fully fulfilled all
but the interaction criteria where there were some small lacks. Furthermore it was found that
Beyond Budgeting also fully fulfilled most of the criterias, here there were small lacks with the
On the basis of this it can be concluded that both models is suitable management models.
In chapter 5 there will be concluded on the thesis problem statement, first by confirm or dismiss the
two hypothesis and then a conclusion on whether Beyond Budgeting is better suited for managing
and controlling a company then traditional budgeting is
Here on the things found in chapter 2 it is dismissed that traditional budgeting has outplayed its role
as a management tool. And on the things found in chapter 3 it is dismissed that Beyond Budgeting
can be seen as a sufficient alternative to traditional Budgeting.
1. juni 2010 iv
Furthermore on the basis of the findings through the analysis in chapter 4, it is concluded that both
models in their own way can be seen as suitable and effective management models. And therefore
all things being equal is usable management models
In connection with the main problem of the thesis it is concluded that event do Beyond Budgeting is
a usable management model, it cannot be seen as a better suited model for managing and
controlling a company the traditional budgeting is. This is concluded because Beyond Budgeting do
not fulfil all the purposes that traditional budgeting has in connection with economic- and company
management, and therefore cannot be seen as a sufficient alternative.
1. juni 2010 v
1. Indledning ........................................................................................................................................ 1
1.1. Problemformulering ........