Beyond Budgeting: Ideas for the Fundamental Redesign of the Management Control Model

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Trend Report – August 08, 2005

Juergen Daum’s Best Practice service

Beyond Budgeting: Ideas for the Fundamental Redesign of the Management Control Model

News categories: Leadership / Corporate Culture, Human capital management, Finance and Acounting, Performance Management and Controlling

With its Beyond Budgeting Management Model, the British Beyond Budgeting Round Table (BBRT) has created an alternative to rigid and traditional budgeting control and the traditional hierarchical management model. The Beyond Budgeting Model has inspired many companies in redesigning their controlling, planning and management systems. What motivates these companies? And just what does "beyond budgeting” mean? How can the traditional budget concept be replaced or renewed? What experiences have companies had with such efforts?

According to prevalent criticism, budgeting takes too much time, budgets are too inflexible, and the whole process is too bureaucratic and impedes the use of a company’s full potential. Fixed, annual and usually too conservative budgets do everything but motivate managers and employees to persue ambitious goals. They prohibit independent and entrepreneurial activity. Their inflexibility makes it impossible to react fast to changes in the market.

Quite obviously, the old planning and controlling concepts are no longer sufficient to drive companies successfully in a global, highly dynamic, and competitive environment. That’s why Péter Horváth, a German expert, consultant and professor in management accounting, rightly questions the very existence of budgeting – and offers a clear answer. "Traditional budgeting, as developed almost 100 years ago, no longer has a future,” he says. According to Horváth, an alternate concept must use appropriate procedures to supplant the motivating, coordinating, and orienting function of budgets.

The Beyond-Budgeting-Management Model as an Alternative

The Beyond Budget Management Model is just such an alternative. It was created by the British Beyond Budgeting Round Table (BBRT) based on more than 30 case studies of companies that are successfully managed without fixed budgets. Jeremy Hope, one of the founders of the BBRT says, "Compared with the traditional management model, Beyond Budgeting has two fundamental differences... read the full article

The quotes used in this articles are extracts from the author’s book "Beyond Budgeting” that has been published in June 2005 (German edition). An English edition will be available end of 2005. More about this book (in German)

Additional Resources:

Why a new Management System ? –article by Juergen H. Daum

Website of the Beyond Budgeting Round Table

J.H.D.’s Beyond Budgeting Info Center

Review: Erster Deutscher Beyond Budgeting Summit, 8.-10. Juni 2005, Frankfurt a.M. (in German)

Juergen H. Daum's book on: Intangible Assets and Value Creation, Wiley 2003

J.H.D.’s Best Practice Channel – Finance

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