There are many concepts and business practices that are set in their ways. Any radical changes are often met with murmurs of discontent from the C-suite, with the old adage of ‘if it isn’t broken, don’t fix it’ used by many decision makers to justify a lack of forward-thinking.
However, showing little to no foresight across myriad business processes can be particularly costly. This is no truer than in budgeting and forecasting principles. While they’re a necessity, many enterprises rely on tools and methods that are incredibly outdated.
Stopping the cycle of wasted time, effort and resources is possible thanks to beyond budgeting.
Companies tend to plan far in advance for the financial year, but they can find their efforts unusable when they actually need to be put into practice. Stopping this cycle of misguided time, effort and resources is possible using the concept of beyond budgeting.
Initially created by Peter Bunce, Jeremy Hope and Robin Fraser – with the latter two even publishing a book on the subject – the idea of changing the budgeting process to something that’s more adaptable and empowered has been around for well over a decade.
Ultimately, Mr Hope and Mr Fraser’s work found that leaders are typically stifled by predetermined budgets, and find it difficult to adapt in the face of the change. The beyond budgeting principle aims to do things differently.
Beyond budgeting explained
While revolutionary, the beyond budgeting process actually consists of just two major steps. They are:
- Phase one: The fixed budget is replaced with a model that is more supportive of rolling, adaptable forecasts and benchmarking measures.
- Phase two: The top-down mentality is removed and decision making is spread across the organisation, with frontline managers garnering more power.
Both of these phases are useful in the wider performance management of the enterprise, not just budgeting. In fact, the Beyond Budgeting Institute created by Mr Bunce and Mr Fraser surmised that “The word ‘budgeting’ is not used in its narrow sense of planning and control, but as a generic term for the traditional command and control management model (with the annual budget process at its core).”
Beyond budgeting: transparency, purpose, shared values, decentralisation, trust, dynamic continuity, open, inclusive pic.twitter.com/fVFsm2yKdL
— Julius Manni (@juliusmanni) March 11, 2015
The results today
As mentioned, beyond budgeting as a concept has been around since the turn of the 21st century, but that doesn’t mean it’s any less valuable in the here and now. Even more than a decade later, the budget is still a critical tool for the vast majority of organisations.
Many businesses realise that a rolling, adaptable planning solution is beneficial, but few are actually making moves to adopt progressive strategies. The most forward-thinking enterprises are able to align their wider business aims with budgeting, give control to key stakeholders across the organisation and also allow more people to better understand aims and goals.
While budgeting may remain an absolute staple, like any other business process, those that think a little differently and adopt the most innovative principles will likely see exemplary results.
Implementation of an effective tool such as IBM Cognos Express (TM1) can help with the transition to a rolling and adaptable planning solution – the CDP Planning Solutions team are happy to discuss the best option for you and your business at any time.