This paper poses the following questions. What is the concept of BB? What are the experiences in practice regarding the implementation of the BB (Beyond Budgeting) concept? How many companies implemented the concept successfully and how many did fail? What are budgeting related factors to achieve business agility? The objective of this assignment is to give answers to these questions by performing an analysis of current literature, journals and case studies related to that topic. To meet the objective a secondary research of current literature, case studies and scientific journals will be performed. The limitation of this paper is given by the research method and needs further validation by empirical studies.
Additionally, alternative budgeting methodologies have not been examined, which could have resulted in a different conclusion regarding business agility in practice and need also be further researched. This paper is divided into two main chapters, beginning with theoretical foundations to better understand the topic, following by an analysis of the mentioned questions above. Hereafter, the research will be summarized by the author’s conclusion and outlook. Digitalization requires rapid organizational flexibility and adaptability to thrive in a more volatile, uncertain, complex, and ambiguous (VUCA) world, we face nowadays.
In context with these developments, traditional budgeting is criticized that it does not work as intended, is too costly, has weak connections to strategy, often prevents from being effective and that it leads to unethical behaviors. Traditional budgeting seams not flexible enough to cope with the nowadays VUCA business environment. Therefore, new budgeting mechanisms for better contribution to business operation and performance are necessary. Beyond budgeting promotes to solve the problem by implementing a performance measurement system relative to competitors and a decentralized organization structure. But very little is heard about the new concept of BB.
Table of Contents
1 Introduction
1.1 Problem description and objectives
1.2 Methodology and structure
2 Theoretical foundations
2.1 Business agility as trigger of beyond budgeting
2.2 Development from traditional to beyond budgeting
2.3 Concept of beyond budgeting
3 Analysis of beyond budgeting implementations in practice
3.1 Overview of companies who implemented beyond budgeting
3.2 Challenges regarding beyond budgeting implementations
3.3 Budgeting related factors to achieve business agility in practice
4 Conclusion and Outlook
Objectives and Themes
This paper aims to investigate the concept of Beyond Budgeting (BB) as a management alternative to traditional, rigid budgeting in volatile business environments. It specifically seeks to answer questions regarding the definition of BB, practical implementation experiences, and the factors required to achieve greater business agility through this model.
- Theoretical evolution of budgeting practices
- Core principles and leadership models of Beyond Budgeting
- Case study analysis of corporate implementations
- Organizational challenges in abandoning traditional budgets
- Requirements for achieving business agility in practice
Excerpt from the Book
2.1 Business agility as trigger of beyond budgeting
Business agility can be understood as an enterprise-wide capability to handle changes that often occur unexpectedly in business environments via innovative and rapid responses that utilize changes as opportunities to grow and thrive (Goldman et al. 1995). Dove defines agility very similar as “the ability to manage and apply knowledge effectively, so that an organization has the potential to thrive in a continuous changing and unpredicted business environment.” (2001, p. 9) Oosterhout et al. (2006) extends Dove’s definition by the ability to sense extreme uncertain internal and external changes triggering reactive and proactive response activities, based on innovative internal operational processes, involved customer feedback in exploration and exploitation activities, while utilizing the capabilities of business partners. The latter definition will be used in this assignment, as this definition comprises a wider scope by considering not only external factors but also internal changes, as well as the involvement of customers and business partners.
Dove describes three enabling elements of Business Agility:
• Knowledge Management
• Value-propositioning skills
• Response ability
This means, an organization’s agility is limited by the value and knowledge of change proficiency held by all involved, whether at enterprise or at department level (Dove, 2001). Change proficiency in rapid changing business environments requires budget planning and resource allocation flexibility. Traditional annual budgets normally rarely change when once approved and limit the ability to adapt to changing conditions. Furthermore, the resulting fixed budgets can mislead managers from strategic priorities and even encourage them to think myopically (Ekholm & Wallin, 2000), (Hope & Fraser, 2003), (Stephen C. Hansen, 2004), (Neely, et al., 2005), (Radonic, 2017).
In summary, it can be derived from research that the raise of business agility triggered new budgeting alternatives like ‘Beyond Budgeting’.
Summary of Chapters
1 Introduction: Provides the context of a VUCA environment and introduces Beyond Budgeting as a potential solution to the limitations of traditional, rigid budgeting practices.
2 Theoretical foundations: Explores the concept of business agility and the historical development of management accounting, culminating in the twelve principles of the Beyond Budgeting model.
3 Analysis of beyond budgeting implementations in practice: Presents a structured overview of real-world company implementations, discusses implementation challenges, and identifies key factors required for business agility.
4 Conclusion and Outlook: Synthesizes the findings, noting the limited adoption of BB and the necessity for further evolution of management models to cope with modern business requirements.
Keywords
Beyond Budgeting, Business Agility, Traditional Budgeting, Management Accounting, VUCA, Decentralized Organization, Performance Measurement, Empowerment, Business-value streams, Strategic Flexibility, Organizational Culture, Resource Allocation, Rolling Forecasts, Management Innovation, Corporate Governance.
Frequently Asked Questions
What is the core focus of this research?
The research focuses on the transition from traditional, rigid budgeting systems to the Beyond Budgeting (BB) management model, which emphasizes organizational agility and decentralization.
What are the primary thematic areas covered?
The work covers theoretical foundations of business agility, the history of budgetary control, an analysis of companies that have adopted BB, and the practical challenges associated with its implementation.
What is the central research question?
The assignment aims to clarify what the Beyond Budgeting concept entails, how it has been experienced in practice, which companies have successfully implemented it, and what factors are necessary to achieve business agility.
Which methodology is employed?
The author performs secondary research, utilizing current literature, scientific journals, and case studies to analyze the effectiveness and challenges of Beyond Budgeting.
What does the main body address?
The main body examines the theoretical basis of business agility, provides a comparative table of companies implementing BB, and discusses the shift toward bottom-up empowerment and decentralized structures.
Which keywords best characterize this work?
Key terms include Beyond Budgeting, Business Agility, VUCA, Performance Measurement, and Decentralized Organization.
Why are most identified Beyond Budgeting implementations in Scandinavian companies?
The text suggests that Scandinavian organizational, institutional, and societal factors create a unique environment that is particularly well-suited for the application of Beyond Budgeting principles.
What role does "business-value streams" play in the BB model?
Focusing on business-value streams is identified as a critical shift necessary to optimize work and organize teams around value rather than rigid, pre-set budget programs.
- Arbeit zitieren
- Claudia Peter (Autor:in), 2021, Beyond Budgeting (BB). Budgeting related factors to achieve business agility, München, GRIN Verlag, https://www.grin.com/document/1168632
