Budgeting Beyond Budgeting, Two Words That Some Essay

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Budgeting

Beyond budgeting, two words that some believe hold the future to a company's financial strength and profitability. No longer is it necessary to implement a plan, make and sell business model. Instead, in today's current business environment it is much simpler to organizations to go beyond the traditional budgeting organization to one that goes beyond that budgeting process by providing the opportunity to respond much faster to the demands of a fickle consumer.

One report determines that the old business model involves protracted time and energy in a budgeting process that assumes "that customers will buy what the company decides to make" (Hope, Fraser, 2000, p. 31) but the report goes on to make the assertion that companies run a huge risk when they make assumptions that "are no longer valid in an age when customers can switch loyalties at the click of a mouse" (p. 31). What Hope and Fraser tout is that the company must be able to understand what practices are needed in order to determine how a company competes effectively in today's global economy.

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Other experts provide further evidence that companies are becoming much less likely to use a budget in the traditional sense of the word. McVay and Cooke state "the beyond decision approach has been designed to surpass the limitations set by the traditional budgeting" (2006, p. 101).

Whether the beyond budgeting process is a current fad or a long-term answer to a constantly changing business environment will be determined in the future, but it does seem to offer some advantages to companies, especially in areas of compensation and rewards.

It has been known for decades that shareholder returns are much higher in companies that display a strong link between strategies and rewards (Harvard Business Update, 1998); the beyond budgeting process helps to establish that strong link. According to one study the beyond budget aims to "not only reduce the costs of budgeting and implement more adaptive planning processes, but also to devolve the responsibility for strategy and….....

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