Traditionel Budgettering versus Beyond Budgeting (PDF)

Thesis (M.A.) from the year 2010 in the subject Business economics - Accounting and Taxes, grade: C, Copenhagen Business School (Institut for Regnskab og Revision. RR), course: Finance, language: Danish, abstract: Beyond Budgeting came up as a "solution" to the growing criticism of the traditional way of budgeting. Jeremy Hope and Robin Fraser founded Beyond Budgeting, with the establishment of "Beyond Budgeting Round Table - BBRT". The members of "BBRT" included companies such as Svenska Handelsbanken, Borealis, IKEA, Volvo and others. Other companies had also engaged in a financial management without budgets and more in the direction of the method behind Beyond Budgeting. Briefly deals Beyond Budgeting with the abolition of the traditional annual budget for a new budgeting method.

The key words for such an accomplishment, is a more adaptable organization with more confidence between the vertical organizational structures. This is achieved through adaptive management principles and a radical decentralization, which is supposed to give employees more authority and confidence to make competent decisions. That is one of the reasons why we found it interesting to find out how it is different, and what it has to offer compared to the traditional way of budgeting. The purpose of this thesis is to compare and analyze the two budgeting methods - traditional budgeting and Beyond Budgeting, to see how they differ from each other and where they can compliment each other. Common to both budgeting methods, is in all its simplicity a desire to have economic focus and to ensure that the company perform in the desired direction. The tool for this task is the company budgeting method, where its main focus is to operationalize the desire and to link the chosen strategy and objective.

Based on our problem field and research question, we took standing point in the two different methods. Added to the analysis we used two different cases to obtain some practical information about the different methods and used this actively in our analysis. Our research showed, amongst other, that it is very crucial what kind of company it is, when dealing with different kind of budgeting methods. Other import factors to look into while choosing budgeting method are, for example, the range of centralization in the organization, levels of control, benchmarking, target-setting, company-culture, strategy, goals and the human resources. These are a few of the most important parameters to take into account while choosing the most suitable budgeting process for a company.