What is Beyond Budgeting?
Beyond budgeting is a management approach that challenges traditional budgeting practices and focuses on continuous, flexible planning and decision-making. It was developed in response to criticisms of traditional budgeting systems, which are often seen as inflexible, time-consuming, and disconnected from the realities of the business environment.
The beyond-budgeting approach emphasizes the importance of aligning organizational goals and resources with changing business conditions, rather than adhering to rigid budget targets. It also emphasizes the importance of decentralized decision-making and empowering employees to take ownership of their work.
The beyond-budgeting approach includes a number of principles and practices, such as:
- Continuous planning and forecasting: Rather than relying on a single, annual budgeting process, beyond budgeting organizations engage in ongoing planning and forecasting to respond to changing business conditions.
- Flexible resource allocation: Beyond budgeting organizations use more flexible mechanisms, such as cost center budgets and rolling forecasts, to allocate resources and make decisions.
- Performance measurement: Beyond budgeting organizations use a variety of performance measures, including both financial and non-financial metrics, to evaluate organizational performance.
- Decentralized decision-making: Beyond budgeting organizations empower employees to make decisions and take ownership of their work, rather than relying on a centralized decision-making process.
The beyond-budgeting approach has been adopted by a number of organizations and has been found to be particularly effective in environments that are highly uncertain or rapidly changing.