A framework aimed at establishing a highly decentralized organizational system and adaptive set of management processes Show
What is Beyond Budgeting?Beyond Budgeting is the idea of abolishing traditional budgeting processes to eventually improve management control over an organization. By abandoning traditional budgeting processes, a company aims to establish a highly decentralized organizational system and adaptive set of management processes. Summary
Rationale Behind Beyond BudgetingThe rationale behind the Beyond Budgeting framework is that traditional budgeting processes carry a number of flaws. Some of the flaws include the following:
Breaking Down Beyond BudgetingThe idea of Beyond Budgeting is still relatively new. The active development of the framework started in the last 20 years. Its rise is associated with the shift from a traditional bureaucratic organizational model to an agile business structure. Essentially, the Beyond Budgeting framework is based on the idea of business agility. Initially, agile enterprises were prevalent primarily among software development companies. Such companies established agile techniques of business to quickly adjust and adapt to the constantly changing goals and requirements in an extremely competitive environment. Nowadays, businesses across different industries actively implement agile techniques to adhere to demanding megatrends such as digitalization, globalization, and mobility. Beyond Budgeting Institute is a non-profit organization that develops and promotes beyond budgeting principles. The organization hosts the annual Beyond Budgeting Round Tables (BBRT), a global network that encourages organizations to learn the BB principles. BBRT also fosters sharing information and experiences of adopting the principles. Beyond Budgeting PrinciplesThe Beyond Budgeting framework is based on 12 principles. However, according to the institute, the principles are neither a recipe nor a checklist for management. The principles merely serve as a guide to companies and managers who are willing to adopt the framework. The two pillars of the Beyond Budgeting framework are decentralized leadership and adaptive management processes. Each dimension of the framework consists of six principles, as shown in the image below: SourceBeyond Budgeting TechniquesComplete abolition of traditional budgeting processes requires the implementation of new techniques that will replace them. The BB framework does not specify the exact techniques that are applicable to all companies. However, there are some techniques that have proven to be effective in real cases in the past. These techniques include the following:
Related ReadingsThank you for reading CFI’s explanation of Beyond Budgeting. To keep learning and advancing your career, the following CFI resources will be helpful:
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