A new management model for the information age based on enterprise not control. Budgets have long been accepted as the way to manage and control activities within organizations. However, traditional budgets are now being challenged, particularly in companies that wish to devolve decision making to the front-line and react quickly to market opportunities. Companies are creating new management processes that encourage responsibility and initiative throughout the organization. The traditional budget process is being replaced by the likes of beyond budgeting.
The Beyond Budgeting approach is a significant shift: executives empower and coach decentralized teams that are more closely connected to customers and to changes in the marketplace. Perhaps this is a time for executives to take a deep breath and consider a business paradox: less bureaucratic control with a Beyond Budgeting approach can yield better long-term results.
Beyond Budgeting and its shift of authority to front-line business units and teams results in quicker and more agile responses to customer needs. The bottom line: companies applying the principles of Beyond Budgeting see continuous improvement in performance and shareholder value.
What are the Beyond Budgeting principles?
|12 Beyond Budgeting Principles|
|Governance and transparency|
|1. Values||Bind people to a common cause; not a central plan|
|2. Governance||Govern through shared values and sound judgement; not detailed rules and regulations|
|3. Transparency||Make information open and transparent; don’t restrict and control it|
|4. Teams||Organize around a seamless network of accountable teams; not centralized functions|
|5. Trust||Trust teams to regulate their performance; don’t micro-manage them|
|6. Accountability||Base accountability on holistic criteria and peer reviews; not on hierarchical relationships|
|Goals and rewards|
|7. Goals||Set ambitious medium-term goals, not short-term fixed targets|
|8. Rewards||Base rewards on relative performance; not on meeting fixed targets|
|Planning and controls|
|9. Planning||Make planning a continuous and inclusive process; not a top-down annual event|
|10. Coordination||Coordinate interactions dynamically; not through annual budgets|
|11. Resources||Make resources available just-in-time; not just-in-case|
|12. Controls||Base controls on fast, frequent feedback; not budget variances|
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